REUTERS/Eduardo Munoz

Argentina has defaulted.

Argentine Finance Minister Axel Kicillof delivered the news to the world from Argentina's consulate in New York City on Wednesday.

Kicillof had just finished a meeting in which he and a delegation from The Republic failed to satisfy the demands of a group of hedge fund creditors negotiating over $1.3 billion worth of debt owed to them for over a decade.

"The Argentine Republic has filed for a stay [on payment] with Judge Griesa ... The Judge decided that if the vulture funds said there could be a stay, there would be a stay," Kicillof said. "The vulture funds were not willing to grant the stay."

Without the stay and without payment, Argentina is in default.

"Notwithstanding any claim to the contrary, default is not a mere 'technical' condition, but rather a real and painful event that will hurt real people: These include all ordinary Argentine citizens, the exchange bondholders (who will not receive their interest ) and the holdouts ( who will not receive payment of the judgments they obtained in Court)," said Daniel Pollack, the Court's appointed mediator.

Pollack also said he would continue to make himself available for more discussions.

In Argentina's defense, Kicillof repeated the same argument that the administration had been making for months — that paying the "vultures" would be a violation of Argentine law. That's because there is a clause in The Republic's bond agreements called the RUFO — Rights Upon Future Offering — clause. It expires in 2015.

According to RUFO, if Argentina negotiates better terms with some bondholders, all bondholders have a claim on those terms. That would open the country to up to $15 billion worth of payments. Earlier this month, the Court didn't buy that, and it refused Argentina's request for a stay on payment until negotiations could be worked out (ideally with a payment to NML due in 2015).

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Argentine Economy Minister Axel Kicillof.

"This was a situation of extortion," Kicillof said. "We will not just sign anything that could lead to more external debt for Argentina ... We will avoid it with all of our weapons."

The "vulture funds" are investors known collectively as NML Capital and led by hedge fund billionaire Paul Singer. They would not take haircuts on debt dating back to Argentina's default in 2001 as with over 90% of their fellow bondholders.

To Argentina, that refusal made them vultures, and you don't pay vultures. Instead you sue them all the way up to the Supreme Court — and lose.

What's off about all this is that the $15 billion from RUFO is chump change compared with what the country might have to pay if it goes into default. Default opens the country up to "acceleration clause" claims — in which bondholders sue for all their money at once, and immediately — worth $29 billion. That's everything in Argentina's Central Bank.

Earlier Wednesday, Argentine bankers put together a last-ditch rescue package. They offered to put down $250 million as collateral — a show of good faith that the country was willing to pay (and avoid triggering RUFO) in 2015. Another option would have been for banks to buy NML's debt, and then request a stay on payment themselves.

But for any of that to happen there would have had to be a stay on payment, and hedge funds would not allow that to happen.

Indeed, even before Kicillof said a word, Standard & Poor's cut the country's rating to "selective default" — meaning Argentina chose to renege on some of its payments.

"We are ... lowering our long-and short-term foreign currency sovereign credit ratings on Argentina to selective default ('SD') from 'CCC-/C,'" the agency's release said, "indicating that Argentina defaulted on some of its foreign currency obligations. At the same time, we are removing the 'CCC-/C' foreign currency ratings from CreditWatch, where they were placed with negative implications on July 1, 2014."

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