It is difficult not to sympathize with the government of Argentina. It says it does not wish to default on its debt, but it is being squeezed by two sets of forces: Argentine domestic law and the overwhelming majority of its creditors on one hand, and a New York court and a small group of creditors that refuse to negotiate what they are owed on the other. Another default looks more likely each day.
In 2001, Buenos Aires defaulted on about $100 billion of its debt, at that time the largest sovereign debt default in history. Over a period of several years, it negotiated with holders of the original securities and agreed to swap the old bonds for new ones worth about 33 cents on the dollar.
Ninety-three percent of the defaulted bonds were swapped. The remaining 7 percent refused to renegotiate and demanded payment in full, a position that the Argentine government argued was manifestly unfair to those creditors who did agree to the haircut.