BUENOS AIRES, July 4 (Reuters) - Argentina on Friday accused a U.S. judge of bias toward hedge funds that have sued the South American country for full repayment of defaulted bonds, cementing the tough stance it has taken ahead of debt talks set for New York next week.
A series of rulings by U.S. District Court Judge Thomas Griesa leave Argentina just three weeks to clinch a deal with the funds before falling into another default, which would heap financial stress on its already shrinking economy.
The government of President Christina Fernandez denounces the funds as vultures bent on crippling Latin America's third largest economy for the sake of profit.
"A lot of officials in the United States say its judicial branch is independent," Argentine cabinet chief Jorge Capitanich said. "But it is not independent of the vulture funds because its decisions show clear partiality."
The legal fight stems from Argentina's 2002 default on about $100 billion in bonds. The financial crisis thrust millions of middle class Argentines into poverty. The economy snapped back from 2003 to 2008 before being weighed down by high inflation and heavy-handed trade and currency controls.
More than 92 percent of the country's investors agreed to receive less than 30 cents on the dollar in bond restructurings carried out in 2005 and 2010.
A group of funds rebuffed those terms after buying bonds at deep discounts and sued in the U.S. federal courts for 100 cents on the dollar. They won a judgment from Griesa in 2012 for $1.3 billion and Argentina's appeals have failed.
The government is sending a team to New York on Monday to set conditions for talks by way of a court-appointed mediator aimed at settling the case. If the negotiations fail, Argentina would enter default, extending its 12-year absence from international capital markets.
Lack of foreign bond financing has pressured central bank reserves to eight-year lows of $29.5 billion and stymied investment in roads and ports needed to keep shipments of soy and corn flowing from the world's No. 3 exporter.
One June 30 the government was stopped from making a payment on its restructured bonds after Griesa ruled it could not pay any of its creditors until a deal is clinched with the funds that went to court for better terms.
The June 30 coupon payment was in limbo after being deposited with the government's transfer agent, Bank of New York Mellon, but not paid out.
Griesa wants the $539 million deposit returned to Argentina's accounts but the government says the money now belongs to the holders of its restructured paper. The government sent notice to the bank this week telling it to make the payout.
"The formal notification is meant to ensure that all agents involved in the operation assume their responsibilities," Capitanich said. "As far as we are concerned, Argentina has fulfilled its obligations ... But the judge has changed the rules."
Bank of New York Mellon is seeking advice from Griesa on how to proceed.
(Additional reporting by Jorge Otaola; Editing by Sandra Maler)