Easier payback of debt

G-7 OK

Poorer nations to get more time to reimburse

Group of 7 holds summit

U.S. tariffs on steel raise tensions at meeting

April 21, 2002|By NEW YORK TIMES NEWS SERVICE

WASHINGTON -- The seven big industrial nations endorsed a new approach yesterday to dealing with financial problems in developing countries, saying they would work together to make it easier for governments in dire economic straits to repay debts more slowly.

The initiative was the most concrete to emerge from two days of meetings here among finance ministers and central bankers from the Group of 7 nations. It could produce some of the most fundamental changes in international finance since the Asian financial crisis of 1998 rocked the global economy.

The officials from the seven countries -- the United States, Japan, Britain, France, Italy, Germany and Canada -- met as their counterparts from 175 other nations gathered at the International Monetary Fund and the World Bank for discussions about how to cultivate financial stability and economic growth.

As the officials met inside, protesters on the streets voiced opposition to what they called the failures of capitalism and the Israeli military action against the Palestinians, as well as American policies in the Middle East and other parts of the world.

There was some tension among the officials here. Although they discussed the topic only sparingly in their official meetings, the United States and the European Union remained at odds over the Bush administration's recent decision to impose tariffs on imported steel. After the Group of 7 finished meeting, European Union officials in Brussels, Belgium, retaliated by imposing 100 percent duties on a range of American goods, including citrus and textiles.

"It would become a very severe burden for the world economic recovery if it came to what we all don't want to happen -- a trade war between the United States and Europe," Hans Eichel, the German finance minister, said in Washington, Reuters reported.

In a statement, the Group of 7 officials said they would continue to work to cut the flow of money to groups believed responsible for terrorism. The group discussed the worsening economic situation in Argentina, which was asking the IMF this weekend for a new aid package.

The group, which effectively sets policy for both the monetary fund and the World Bank, remained divided on a number of issues. Among them is a proposal by Treasury Secretary Paul O'Neill to have the World Bank provide as much as half of its aid to poor nations in the form of outright grants rather than loans. Many European governments fear that such an approach could lead to cutbacks in the amount of aid rich nations will make available.

But the group reached a compromise on how to develop a better system for helping the governments of developing countries when they run into financial trouble and cannot make their debt payments. Under current practice, poor nations have great difficulty working out agreements for new repayment schedules with the investors who purchase their bonds because such agreements effectively require unanimous backing of the bondholders.

The other six nations agreed yesterday to go along with an American proposal for a system under which new debt issued by developing nations would include contractual agreements with investors allowing a smaller proportion of bondholders to agree on new repayment terms. The United States has pressed for such an approach on the basis that such problems are best worked out in the marketplace between investors and governments.

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