Citibank headquarters in Buenos Aires
A woman walks past Citibank headquarters in Buenos Aires' financial district Reuters

The Argentine government is suing the local subsidiary of Citigroup for collaborating with the country's holdout creditors and halting payments on its debt.

Economy Minister Axel Kicillof said the country would be suing Citibank Argentina, as it "signed a deal with the devil on March 20th, with the vulture hedge funds, to abandon Argentina."

As per the deal, Citibank, which acts as custodian of some Argentine bonds, agreed to hand over the details of client accounts and fund movements to the hedge funds, Kicillof accused.

He added that the deal "violated and interfered with regulations governing our public debt."

In a statement, Citibank said it was "disappointed" by the legal actions, and that it was simply trying to comply with a US court order.

"Citi has acted in accordance with all applicable laws and will respond to these actions in due course," the bank said.

Citigroup was earlier banned from making payments to debtholders on behalf of the country by US district judge Thomas Griesa, who is presiding over the country's case with holdout hedge funds.

Argentina has been engaged in a long legal battle with hedge funds led by Elliott Management Corp and Aurelius Capital Management LP, which refused to take part in the country's debt restructuring after its 2001 default.

NML Capital, a subsidiary of Elliot, purchased Argentine debt on the secondary market and rejected Argentina's restructuring offers. NML sued for full repayment in US courts, initially seeking more than $1.3bn (£872m, €1.2bn).

On March 20, Citibank signed a deal with NML.

Griesa had earlier ruled in favour of the so-called vulture funds, barring Argentina from paying the holders of its restructured debt unless it pays the hedge funds. The ruling led to a second Argentine default last summer.