Argentina to US: Stop using the ‘D’ word

Argentina’s debt drama could turn into a full-fledged diplomatic fiasco with the US.

Foreign minister Hector Timerman warned he would take “severe measures” and boot American ambassador Kevin Sullivan from the country for using the “D” word — or default — in a newspaper interview.

“If these kind of interferences in the internal affairs of Argentina continue, the most severe measures stipulated by the Vienna Convention regarding the behavior of diplomatic representatives will be adopted,” Timerman said in a statement on Tuesday.

Timerman summoned the top US diplomat to his office after Sullivan told local paper Clarin that “it is important for Argentina to emerge from default as soon as possible to return to the path of sustainable economic growth and attract the investment it needs.”

Argentina denies being in default and blames the US courts and “vulture” investors for making it miss a July debt payment to one group of bondholders.

“The Minister expressed the Argentine Government’s deep indignation and energetic rejection of the US diplomat’s inappropriate statements published yesterday, in relation to the payment to creditors holding restructured debt,” the statement said.

Sullivan was weighing in on Argentina’s long-running battle with a group of holdout bondholders that has refused to go along with the country’s earlier debt restructuring.

US courts have sided with hedge fund billionaire Paul Singer and the other holdouts, ruling that Argentina must pay them whenever its pays bondholders who agreed to accept pennies on the dollar.

Payments to the latter group are being withheld by trustee Bank of New York Mellon due to the court’s orders.

Argentina has revoked the bank’s license and passed a law to exchange those bonds into similar local law bonds.

The US was one of the few countries that did not back a recent UN resolution, proposed by China and developing nations, to create a new regime for sovereign debt restructurings.