Argentina's Economy Minister Axel Kicillof warned United Nations diplomats on Wednesday the country is being pushed toward a new default after a U.S. Supreme Court decision favored holdout creditors seeking payment on bonds it defaulted on in 2001-2002.
Referring to those creditors as "vulture funds," Kicillof said the June 16 decision by the top U.S. court to deny Argentina the chance to appeal a lower court ruling means it faces an insurmountable payment to all bondholders, given it has just $28.5 billion in foreign currency reserves.
"So probably this is going to push us into a technical default," Kicillof said through an interpreter. "Whichever way you look at it this ruling is forcing Argentina towards the risk of economic crisis."
The holdouts are led by Elliott Management's NML Capital and Aurelius Capital Management.
"Once these funds get recognition of 100 percent of the value of their bonds, which were purchased under vile conditions of having paid only 30 cents on the dollar, there could be more demand from other holders who did not participate in the restructurings," Kicillof said.
He was speaking to members of the Group of 77 plus China meeting at the U.N. in New York. It was not clear if he would meet with holdout creditors while in the city.
U.S. District Judge Thomas Griesa of the Southern District of New York had ordered Argentina to pay the holdouts $1.33 billion plus accrued interest, at the same time it pays the 93 percent of bondholders who accepted the terms of the sovereign restructuring in 2005 and 2010.
Argentina is due to make a $900 million coupon payment on June 30, but has a 30-day grace period in which to come to an agreement with the holdouts. They have written to Judge Griesa saying they would discuss an accommodation with Argentina if good progress is made in any talks.
Daniel Pollack, the court-appointed special master in the dispute, issued a statement on Wednesday confirming a Reuters report that he had met with lawyers from both sides on Tuesday.
Read MoreArgentina mulls payment to holdout creditors: report
"No resolution has been reached," the statement said, adding that he also spoke with both sides in phone calls in the last 48 hours.
While in New York, Kicillof will also meet with lawyers for the Argentine government a government source in Buenos Aires told Reuters on Tuesday, but it is unclear whether he will meet with holdout investors.
Attempts to contact the holdout investors on Wednesday were unsuccessful.
Argentina says it is being ordered to pay the holdouts $1.5 billion while the holdouts contend that by June 30th the figure will have risen to $1.65 billion because of accrued interest.
Argentine officials, including President Cristina Fernandez, have said the country will not pay these investors, arguing it could face potential demands for up to $15 billion from other holdouts not involved with the case - an amount representing more than half of the government's $28.5 billion in foreign currency reserves.
The United Nations trade agency, or UNCTAD, weighed in on the case on Wednesday, echoing concerns voiced by the United States as well as the International Monetary Fund that the ruling in favor of holdouts erodes sovereign immunity and is a setback for the debt restructuring process.