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UPDATE 1-Holdout investors tell Argentina: 'Time is running out' for deal

(Adds Argentine president; bonds fall)

BUENOS AIRES, July 16 (Reuters) - Argentina is running out of time to broker a deal with "holdout" bondholder investors and stave off another painful debt default, lobbyists acting for the New York hedge funds suing the country said in a media ad on Wednesday.

Latin America's No. 3 economy has just two weeks to cut a deal with the holdouts, but a government source told Reuters on Tuesday there would be no face-to-face talks with a court-appointed mediator this week, raising questions over Argentina's commitment to reaching an agreement.

The holdouts spurned the terms of Argentina's 2005 and 2010 debt restructuring following a $100 billion default in 2002. Argentina has until July 30 to reach a deal with the funds or face default.

Argentine officials and holdouts met separately with mediator Daniel Pollack in New York last Friday, but no plans were made for Finance Minister Axel Kicillof or others to return.

"Time is running out for Argentina," read a full-page advertisement placed in Argentina's El Cronista daily by the American Task Force Argentina (AFTA). "A default is not a political game, so why would Mr. Kicillof contemplate one?

"It is time for Argentina to demand that its leaders behave in a serious and responsible manner to save this country from default."

For years Argentina shunned negotiations with the holdouts, portrayed by President Cristina Fernandez as "vultures" picking on the bones of Argentina's $100 billion default in 2002.

But the government has exhausted its legal options to get around a 2012 ruling by U.S. District Judge Thomas Griesa that it pay holdouts $1.33 billion, plus accrued interest.

A shrinking economy and dwindling foreign reserves have increased pressure on Fernandez to negotiate, though she and her ministers have kept up their frothy, nationalistic rhetoric.

"We need to put an end to this sort of international looting of finances, as they are doing today with Argentina," Fernandez told supporters on Wednesday in Fortaleza, where she is attending a summit of the so-called BRICS economies.

The holdouts bought the bonds in the secondary market at a steep discount - about 30 cents on the dollar - and want payment in full.

Until Argentina pays, or reaches a deal with the holdouts, Griesa will prevent Argentina from servicing restructured debt resulting from 2005 and 2010 debt swaps. That means it could go into default by a July 30 deadline for an interest payment.

The holdouts involved in the case, led by Elliott Management Corp and Aurelius Capital Management, say they are willing to accept bonds as part of a deal.

The lack of positive news on the conflict began on Wednesday to reflect on local assets. Argentine bond prices fell, with the dollar par bond down 1.65 percent to $50.65 on the over-the-counter market at noon (1500 GMT).

Bond prices had been gaining over the past month on general expectations in markets that a deal would be reached.

"None of these vulture funds put a cent into Argentina. On the contrary they bought (the defaulted bonds) on the cheap. They are shameless," Jorge Capitanich, Fernandez's cabinet chief, said on Wednesday in response to the latest newspaper ad.

(Additional reporting by Alejandro Lifschitz; Editing by W Simon and Dan Grebler)