The case stems from Argentina's 2002 default on about $100 billion, which has weighed on Latin America's No. 3 economy by locking it out of the global bond market at a time of stagnant growth and high inflation.

Hedge funds that rejected the terms of Argentina's 2005 and 2010 restructurings, in which a vast majority of holders took steep payment cuts, offered last month to restart talks aimed at clearing the rest of the country's non-paying sovereign bonds.

Asked by a reporter if Argentina would accept the offer to restart talks, cabinet chief Jorge Capitanich said: "At this point, we'll have to see the ruling in March."

U.S. District Judge Thomas Griesa has halted payments on Argentina's restructured bonds until a deal is reached with funds demanding better terms than offered in 2005 and 2010.

He has set a March 3 hearing on whether Citigroup Inc can process interest payments on bonds issued under local Argentine laws. In November he put off a determinative ruling while allowing the bank to temporarily process payments.

"That ruling should have been permanent," Capitanich said, "considering it makes no sense to impede these payments."

Argentina said last week it was considering the offer to re-open restructuring talks. But any hope of a quick settlement was doused on Monday when Capitanich said that Griesa and his hand-picked mediator, Daniel Pollack, have lined up with the bondholders against Argentina.

"With respect to Daniel Pollack, the mediator is not a mediator. The mediator is representing the interests of the vulture funds. This has been clear from the beginning," Capitanich said. "He is no more impartial than Griesa is."

Buenos Aires said last year that the "RUFO" clause in the restructured bonds blocked it from offering better terms than investors got in the 2005 and 2010 exchanges.

The clause expired at the end of 2014 but Argentina has shown little interest in returning to restructuring talks with holders it characterizes as "vultures" out to make astronomical profits on bonds that many of them bought at steep discounts.

(Additional reporting by Walter Bianchi)

By Hugh Bronstein