WASHINGTON -- Finance ministers from the Group of Seven industrialized nations have embraced a four-year-long Canadian-led effort to rewrite the rules for global borrowers and lenders -- a plan designed to avert debt crises such as the one gripping Argentina.
"This is a tremendous Canadian achievement," Finance Minister Paul Martin said yesterday as officials from the Group of Seven industrialized countries, the 183-member International Monetary Fund and the World Bank wrapped up their semi-annual meetings in Washington.
He added that he hopes G7 ministers will put some "flesh on the bones" of the agreement before the June meeting of the Group of Eight in Kananaskis, Alta.
Mr. Martin said much of the G7 action plan could be ready to implement within a year, and he pledged that Canada will use its chairmanship of the group to complete the job. Mr. Martin said he doesn't want to be talking about the proposal when the next financial crisis hits.
"Argentina's crisis would not have happened if this was in place," he said.
In a communiqué Saturday, the G7 endorsed an action plan that includes limiting the size of financial bailouts.
The plan also aims to get emerging market countries to agree to debt restructuring provisions before they borrow money, but stopped short of signing on to an International Monetary Fund plan to create an international bankruptcy court.
Mr. Martin said the agreement marks a critical commitment to create an international regime that would replicate domestic bankruptcy laws, which allow orderly workouts of troubled companies in most developed countries.
This protects indebted countries from "the rush for the exits" that led to the bouts of global financial contagion that have occurred in the past decade, he pointed out.
Speaking to reporters, U.S. Treasury Secretary Paul O'Neill said the G7 wants to "move from reacting to crises with repair efforts to a world in which all nations have investment-grade sovereign debt."
In addition to Canada, the G7 is made up of the United States, Japan, German, Britain, France and Italy. The expanded G8 includes Russia, which joins the group for non-financial issues.
G7 and IMF officials had tough words for Argentina, demanding that it make fundamental reforms and get a grip on spending by its provincial governments before it will get new loans totalling roughly $10-billion (U.S.).
Mr. Martin and Bank of Canada Governor David Dodge met yesterday with their Argentine counterparts to complain about what Mr. Martin called the unfair treatment of Scotiabank Quilmes -- Bank of Nova Scotia's troubled Argentina-based unit.
"There has to be fair treatment for foreign banks, beginning with the Bank of Nova Scotia," Mr. Martin said, prior to the meeting.
"They have to be dealt with in terms of liquidity and fairness the same way they deal with domestic banks," he added. "They can't discriminate."
Last week, Argentina slapped Scotiabank Quilmes with a 30-day suspension after parent Scotiabank and the central bank refused to inject new capital into the bank.
The country has since ordered a shutdown of its entire banking system, and it isn't clear what will happen to Scotiabank Quilmes when other banks eventually reopen.
After the meeting, Mr. Martin said the Argentine officials "had accepted" the Canadian arguments. "It remains to be seen what will follow. They understood our points, but there were no commitments."
IMF managing director Horst Koehler said he expects a mission to travel to Argentina "as soon as possible" in May to kick-start stalled negotiations.
The weekend's meetings in Washington went off without the violent protests that have marred other recent international gatherings, including last year's Summit of the Americas in Quebec City. A few thousand antiglobalization protesters were easily outnumbered by tens of thousands of pro-Palestinian demonstrators as the two groups joined forces and marched on Capital Hill Saturday.
Smaller, mostly peaceful, anti-globalization protests continued yesterday, forcing the shutdown of dozens of downtown Washington streets.
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