New York: The hedge fund firm of billionaire Paul Singer has about 300 employees, yet it has managed to force Argentina, a nation of 41 million people, to default on its debt for the second time in 13 years.

Argentina failed to make scheduled payments by midnight, Wednesday, New York time on its government bonds. The country has the money to pay the bonds, but a US federal court in Manhattan has ruled that unless Argentina settles its debt dispute with Mr Singer's firm, Elliott Management, it is barred from paying its main bondholders.

After more than five hours of meetings Wednesday, the sides failed to reach an agreement and the court-appointed mediator said that Argentina would "imminently be in default." Because a $US539 million ($578 million) interest payment was not made, the ratings agency Standard & Poor's said that Argentina was in default on those bonds.

The government of Argentina now faces a stark choice: try to restart negotiations with investors it has repeatedly called "vultures", who have for years refused to accept anything other than full repayment. Or it can remain ensnared in a default that could weigh on the country's fragile economy and unsettle global markets.