(Reuters) - Argentina's Cabinet chief Jorge Capitanich said on Friday the government held no positive expectations for a court hearing in New York later in the day that will discuss the South American country's debt default.

The default occurred after Latin America's No. 3 economy failed to reach a deal with holdout investors suing it for full repayment on bonds they bought at a steep discount following the country's previous default in 2002 on $100 billion of debt.

The government maintains it has not defaulted because it made a required interest payment on one of its bonds. But U.S. District Judge Thomas Griesa blocked that deposit in June, saying it violated his ruling that Argentina settle their dispute with holdout investors first. "We can't hold any positive expectations because (Judge Griesa) has always held the view of someone who is partial," Capitanich told reporters in the capital, Buenos Aires.

On Thursday, Capitanich branded Griesa an "agent" of the litigating New York hedge funds. Griesa is scheduled to hold Friday's hearing at 11 a.m. (1500 GMT). Argentina's bonds, stock markets and peso currency fell on Thursday on news of the default, but did not cause a rout. Market participants and analysts are generally optimistic about an eventual deal, which could include private sector players.

Argentines already grappling with an economy in recession and one of the highest rates of inflation in the world took the default calmly, with many saying economic crises were the norm.

For now, there are no signs the debt crisis is heightening discontent with the government. Instead, many approve of its stand-off with the funds it calls "vultures".