(Adds quotes from Argentine president's speech)

By Lawrence Hurley and Sarah Marsh

WASHINGTON/BUENOS AIRES, June 16 (Reuters) - President Cristina Fernandez vowed on Monday to find a way to service Argentina's restructured debt despite suffering a major setback in a long legal battle against "holdout" investors that pushed the country closer to a new default.

Hours after the U.S. Supreme Court refused to hear an Argentine appeal aimed at staving off a default, a defiant Fernandez slammed U.S. courts for repeatedly ruling against her government.

She also said Argentina was the victim of "extortion" by holdouts who refused to join debt restructuring deals since the catastrophic 2001-02 default on $100 billion of sovereign debt.

But Fernandez said she was still open to negotiations and insisted she would continue to pay the more than 90 percent of creditors who accepted a renegotiation of the defaulted debt.

"Argentina will fulfill its obligations and it will not default on its restructured debt," she said in a televised speech.

She gave no details on how it would manage that, however, saying only that she had told her economy minister to set up "all the tools needed to make the payment to those who trusted in Argentina."

The Supreme Court's unexpected refusal to hear Argentina's appeal left intact lower court rulings that ordered it to pay holdout hedge funds $1.33 billion.

Argentina has so far refused to pay the holdout investors unless they also agree to a restructuring of the debt.

If it sticks to that position, U.S. District Judge Thomas Griesa could prevent payment to exchange bondholders even though the country is able and willing to service that debt.

That could result in a default by June 30, when payments are due on discount bonds under U.S. jurisdiction.

Fernandez calls the hedge funds "vultures" and says that agreeing to pay them on their terms would lead to claims from other holdouts on about $15 billion of debt -- equivalent to more than half the foreign currency reserves held by Argentina's central bank.

"Argentina has shown it is willing to negotiate, but it does not have to submit itself to such extortion," Fernandez said.

She insisted Argentina cannot give holdouts preferential treatment over exchange bondholders after many of them bought the debt at a massive discount and are claiming payback in full.

Argentine stocks and bonds fell sharply on Monday because investors had expected the Supreme Court to delay a decision on the appeal, giving Fernandez time to negotiate with holdouts or restructure its exchange bonds outside of U.S. jurisdiction.