(Updates with statements from mediator, NML)
By Daniel Bases
NEW YORK, July 24 (Reuters) - Less than a week before Argentina could default on its sovereign bonds, the government and holdout creditors have yet to meet face-to-face despite an urgent plea from the U.S. court-appointed mediator on Thursday that they start direct talks.
"The issues separating the parties remain unresolved at this time. The time for the Republic to avoid default (July 30) is short," mediator Daniel Pollack said in a statement following three hours of shuttle diplomacy.
"After speaking with both sides, separately, I proposed and urged direct, face-to-face talks between the parties. The representatives of the bondholders were agreeable to direct talks. The representatives of the Republic declined to engage in direct talks," Pollack said.
On Tuesday U.S. District Judge Thomas Griesa ordered both sides to meet continuously with the mediator in an effort to find a solution to unblock a June 30 debt payment before the grace period ends on July 30. The next meeting is set for 10 a.m. EDT (1400 GMT) on Friday.
Argentina faces its second default in 12 years unless it either pays the holdouts their court-awarded $1.33 billion plus accrued interest on defaulted bonds or agrees to a settlement.
A solution would allow payment, blocked by Griesa's court order, to creditors who participated in two prior restructurings in 2005 and 2010 to be delivered in time.
Griesa ordered the simultaneous payment of both holdouts and restructured bondholders or no money be paid out at all.
Argentina fears it is at risk of falling foul of a provision in the restructured bonds, known as the Rights upon Future Offers (RUFO), that bars it from voluntarily offering better terms to investors than what it gave in the restructurings.
In 2002 the country, facing dire economic conditions, defaulted on approximately $100 billion of sovereign debt.
The government representatives included Finance Secretary Pablo Lopez, Attorney General Angelina Abbona and her deputy Javier Pargament, as well as the Economy Ministry's Legal and Technical Secretary Federico Thea.
Argentina's Economy Ministry, in a statement issued late Thursday in English, reiterated its argument that it needs protection from RUFO, without which it faces tens of billions of dollars in liabilities.
"It was mentioned that if the litigants (holdouts) do not provide the above-referenced assurances to the Republic, a stay continues to be the best option to allow a solution in fair, equitable, sustainable and legal conditions for 100 percent of the bondholders to be reached," the statement said.