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BUENOS AIRES, Argentina (AP) — The Argentine government plans to sidestep a U.S. court order that it repay defaulted bonds in full, saying creditors who accepted debt restructurings will be offered new bonds to be paid in Argentina rather than the United States.

Economy Minister Axel Kicillof said Tuesday that the government is "starting to take steps to begin a debt swap" to service the country's restructured debt in "Argentina and under Argentine law."

The announcement came a day after the U.S. Supreme Court refused to intervene in a U.S. judge's order that would deny use of the U.S. financial system to Argentina unless it first pays off holders of defaulted bonds who didn't accept the earlier debt swaps. Argentina has objected to paying the "holdout" creditors.

The high court also ruled that the holdout bondholders who won the legal case could use U.S. courts to force Argentina to reveal where it owns property around the world.

The arrangement outlined by Kicillof would involve investors who previously agreed to swap government bonds that were defaulted on in Argentina's 2001 economic collapse for new, less valuable bonds that the government has being paying on since 2005. Those new bonds are governed by U.S. law.

If Argentina were forced to pay off in full what the government calls "vulture funds," the country could become an easy prey and would ultimately be "pushed into a default," Kicillof said.

"Some say we should negotiate with vultures, but the vultures are vultures because they don't negotiate," he said. "If they were in conditions to negotiate, they would have done it like the rest of the bondholders."

President Cristina Fernandez criticized the U.S. judge's ruling requiring a $1.5 billion payment, of full value plus interest, to investors who didn't accept the previous debt restructurings.

In a national address Monday night, she defiantly vowed not to submit to "extortion" by NML Capital and other investors that refused to trade in defaulted bonds. But she said her government "will not default on those who believed in Argentina" by accepting the debt swaps.

While conceding the Supreme Court's decision was unfavorable, Kicillof kept the possibility of negotiation open, but said Argentina was not willing to "do anything, under any condition, to accept exorbitant conditions" to resolve the debt fight.

The court's decision was a blow to Argentina's aspirations to return to global credit markets after being shut out since its 2001-02 economic crisis and default.

Fernandez and her late husband and predecessor as president, Nestor Kirchner, negotiated or paid off most of the country's defaulted debt. Argentina has paid its debt with the International Monetary Fund, and in May it agreed with the Paris Club of creditor nations on a plan to resolve $9.7 billion in debts that have gone unpaid since the economic collapse.

Bowing to the U.S. ruling would force Fernandez to betray a core value that she and her late husband promoted since they took over the government in 2003: Argentina must maintain its sovereignty and economic independence at any cost.

The president's hard line on the U.S. ruling seemed to be a last effort to gain leverage ahead of a negotiated solution that both sides say they want.

With only days before a huge debt payment ordered by the court is due, many analysts and politicians say negotiations with the holdout investors are needed to avoid a new default and a blow to the country's reputation.

"Another default can be quite costly economically and financially," Alberto Ramos, Latin America economist for Goldman Sachs, said. "And the uncertainty and volatility that would generate would put added pressure on an already struggling economy, on the exchange rate, and therefore also on reserves."

Standard & Poor's Ratings Services on Tuesday lowered its long-term foreign currency rating on Argentina to "CCC-" from "CCC+." The ratings agency cited a higher risk of default on Argentina's foreign currency debt.

But Argentina's Merval stock index, which had plunged 10 percent after Monday's court decision, rebounded Tuesday and closed up 3.75 percent on hopes the government would announce a solution.

Daniel Kerner, an analyst at Eurasia Group, said the debt swap announced by Kicillof was probably meant to strengthen Argentina's position in negotiations. But Kerner said a new debt swap would have to be agreed on quickly, or Argentina would risk missing a June 30 deadline for making payments on the existing bonds and falling in to default.

Still, he cautioned in an email statement that while Argentina wants to negotiate, it should be recognized that "the government is willing to default and has limits as to how much they can concede."

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Associated Press writers Almudena Calatrava in Buenos Aires and Luis Andres Henao in Santiago, Chile, contributed to this report.

BERLIN (AP) — Germany's Siemens AG and Japan's Mitsubishi Heavy Industries say they've agreed to join forces on a multi-billion euro proposal involving purchasing parts of France's Alstom and injecting money into the company.

Siemens said Monday it's offering 3.9 billion euros ($5.3 billion) to acquire Alstom's gas business entirely and will give three-year job guarantees in France and Germany for the transferred business. Mitsubishi would purchase a 10 percent stake of Alstom and inject 3.1 billion euros into the company.

The companies say their proposal would "preserve Alstom's current perimeter in almost all its activities" while strengthening its finances and leaving it a major French listed group.

French President Francois Hollande, who's said General Electric Co.'s own bid for Alstom isn't good enough, plans to meet the Siemens and Mitsubishi CEOs Tuesday.

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BAGHDAD (AP) — Signs emerged Tuesday of a reprisal sectarian slaughter of Sunnis in Iraq, as police said pro-government Shiite militiamen killed nearly four dozen detainees after insurgents tried to storm the jail northeast of Baghdad.

A local morgue official said many of the detainees had bullet wounds to the head and chest, though the Iraqi military insisted the Sunni inmates were killed by mortar shells in the attack on the facility outside the city of Baqouba.

In Baghdad, meanwhile, the bullet-riddled bodies of four men in their late 20s or early 30s, presumably Sunnis, were found at different locations in the Shiite neighborhood of Benouk, according to police and morgue officials who spoke on condition of anonymity because they were not authorized to talk with the media.

Also Tuesday, a car bomb in Baghdad's Shiite Sadr City district killed 12 people and wounded 30 in a crowded outdoor market, police and hospital officials said. No one claimed responsibility for the bombing, but attacks targeting Shiite districts are routinely the work of Sunni militants.

The Sadr City deaths take to at least 22 the number of people killed in violence in Baghdad on Tuesday.

The discovery was a grim reminder of a dark chapter in Iraq's history when nearly a decade ago the city woke up virtually every morning to find dozens of bodies dumped in the streets, trash heaps or in the Tigris river with torture marks or gunshot wounds.

The allegation of Shiite killings of Sunnis near Baqouba and in Baghdad were the first hints of the beginnings of a return to sectarian warfare that nearly tore the country apart in 2006 and 2007. Sunni militants also have been accused of atrocities — an apparent attempt to provoke Shiite militias into revenge attacks that would strengthen the hand of an al-Qaida splinter group within Iraq's Sunni community.

A U.N. commission warned Tuesday that "a regional war in the Middle East draws ever closer" as Sunni insurgents advance across Iraq to control areas bridging the Iraq-Syria frontier. It said Iraq's turmoil will have "violent repercussions" in Syria, most dangerously the rise of sectarian violence as "a direct consequence of the dominance of extremist groups."

During the United States' eight-year presence in Iraq, American forces acted as a buffer between the two Islamic sects, though with limited success. The U.S. military withdrew at the end of 2011, but it is now being pulled back in — albeit so far in far fewer numbers.

The fighting around the jail was the closest to Baghdad since the al-Qaida breakaway group the Islamic State of Iraq and the Levant began its lightning advance, seizing several key northern cities in the Sunni heartland last week.

There were conflicting details about the clashes in the al-Kattoun district near Baqouba, the capital of Diyala province and one of the bloodiest battlefields of the U.S.-led war, and on how the detainees were killed. The city is 60 kilometers (40 miles) northeast of the Iraqi capital.

Officers said the local police station, which has a small jail, came under attack Monday night by Sunni militants who arrived in two sedan cars to free the detainees. The militants fired rocket-propelled grenades on the building before opening fire with assault rifles.

A SWAT team accompanied by Shiite militiamen rushed to scene and asked the local policemen to leave, according to the officers. When the policemen later returned to the station, they found all those in the detention cells dead.

The bodies were taken to the Baqouba morgue, where an official said most had gunshot wounds to the head and chest. One detainee, however, survived and was taken to the hospital.

Police later arrived at the hospital and took the wounded man away, said a hospital official.

The police officers, the hospital and morgue officials all spoke on condition of anonymity, fearing for their own safety.

A different account was provided to The Associated Press by Iraq's chief military spokesman, Lt. Gen. Qassim al-Moussawi. He said 52 detainees who were held at the station in al-Kattoun died when the attackers from the Islamic State shelled it with mortars.

Nine of the attackers were killed, al-Moussawi said.

The Islamic State is known to be active in Diyala, a volatile province with a mix of Sunnis, Shiites and Kurds and where Shiite militiamen are deployed alongside government forces. Sunni militants have for years targeted security forces and Shiite civilians in the province, which abuts the Iranian border.

The Islamic State has vowed to march to Baghdad, and the Shiite holy cities of Karbala and Najaf in the worst threat to Iraq's stability since U.S. troops left. The three cities are home to some of the most revered Shiite shrines. The Islamic State has also tried to capture the city of Samarra north of Baghdad, home to another major Shiite shrine.

Nearly 300 armed American forces are being positioned in and around Iraq to help secure U.S. assets as President Barack Obama nears a decision on an array of options for combating the Islamic militants, including airstrikes or a contingent of special forces.

The White House has continued to emphasize that any military engagement remained contingent on the government in Baghdad making political reforms.

The U.S. and Iran, Iraq's Shiite neighbor and close ally, also held an initial discussion on how the longtime foes might cooperate to ease the threat from the al-Qaida-linked militants that have swept through Iraq. Still, the White House ruled out the possibility that Washington and Tehran might coordinate military operations in Iraq.

The push by the Islamic State's militants has largely been unchecked as Iraqi troops and police melted away and surrendered in the onslaught on the city of Mosul and Trikrit, Saddam Hussein's hometown.

On Monday, the Islamic State captured the strategically located city of Tal Afar near the Syrian border, a move that strengthens its plans to carve out a state-like enclave on both sides of the border.

Iraqi military officials said some 400 elite troops and volunteers who have joined security forces were flown to an airport outside Tal Afar on Monday, but were immediately pinned down by heavy artillery shelling from the militants.

Iraq has been in danger of sliding back to wholesale Shiite-Sunni bloodletting since Sunni militants seized at least one city and significant parts of the countryside in Anbar province west of Baghdad early this year.

Continuous bombings blamed on Sunni militants in Baghdad and elsewhere, and targeted assassinations of members of both communities have deepened fears of outright sectarian warfare.

In Baghdad on Tuesday, a suicide bomber set off his explosives outside a central Baghdad store that sells military uniforms, killing seven people and wounding 22, according to police and hospital officials.

Elsewhere in the capital, a sticky bomb attached to a car exploded, killing three passengers and wounding 11 bystanders, according to police and hospital officials.

The officials all spoke on condition of anonymity because they were not authorized to talk to the media.Police and hospital official say a car bomb in Baghdad's Shiite Sadr City district has killed 10 people and wounded 25.

They said the blast targeted a crowded outdoor market Tuesday in the sprawling district in eastern Baghdad.

The officials spoke on condition of anonymity because they were not authorized to speak to journalists.

The latest death toll takes to 20 the number of people killed in violence in Baghdad on Tuesday.

Additionally, four bullet-riddled bodies, assumingly Sunnis, were discovered on Tuesday in a Shiite district.

The targeting of the Shiite district came as signs emerged of a reprisal sectarian slaughter of Sunnis in Iraq, as police said pro-government Shiite militiamen killed nearly four dozen detainees after insurgents tried to storm a jail northeast of Baghdad on Monday night.