OTTAWA, Feb. 10 - Finance ministers of the Group of Seven (G-7) industrialized countries have snuffed out hope of a bail-out for the nearly bankrupt Argentine banking system or for the tumbling Japanese economy.
After two days of meetings here with the head of Russia's economic ministry and the leaders of the International Monetary Fund (IMF) and the World Bank, the G-7 finance ministers issued a closing statement late Saturday that was heavy with optimism but light on specifics.
"We discussed the global economic outlook and the current slowdown. We are in agreement that we expect it to be short-lived," said Canadian Finance Minister Paul Martin, the chairman of the two-day meeting.
Argentina had hoped for more concrete help before it abandons dollarization and allows its peso to find a market value. Argentina's government and banks have defaulted on billions of dollars in foreign debt. Argentines, enraged by bank shutdowns and asset freezes, have reacted with weeks of sometimes-violent protests.
Argentine President Eduardo Duhalde on Friday unveiled sweeping government spending cuts and a plan to free the peso from its fixed rate against the U.S. dollar on Monday. These were two conditions placed on Argentina by the IMF, but it wants more cuts and a debt rescheduling in return for up to 25 billion dollars in new loans to help soothe the crisis.
The IMF ended new loans to Argentina in December, leading to the default on its massive 141 billion dollar foreign debt.
The government of former Argentine President Fernando de la Rua imposed a banking freeze Dec. 1 to stop a run on banks that saw 2 billion dollars yanked from the teetering financial system in a single day.
Japan's yen has been tumbling against major currencies and its stock market has been sinking as the country's economy contracts.
Despite upbeat talk in the communiqué, the only region mentioned by the G-7 as showing signs of recovery is North America, where the economies of the United States and Canada showed slight growth in the last quarter.
The G-7's communiqué said Argentina is taking "steps in the right direction" but the countries and agencies offered no more help to the country. Instead, they said Argentina should continue to work with the IMF on a recovery plan for the country.
"The main responsibility for defining a coherent strategy must remain with Argentina itself, as it does, indeed with every other country,'' the document stated.
U.S. Treasury Secretary Paul O'Neil said it was up to the Japanese to lead their economy to recovery. "It is very important that Japan be an engine of growth for the world economy. It's up to them to do that," he said.
Poorer countries that hoped for some kind of economic help were told that the G-7 ministers believe governments that receive development aid must become more accountable for the money they receive. The G-7 ministers said they "underlined the need for more effective use of development assistance." They called on recipient countries to make "a commitment to sound policies, good governance and the rule of law."
About 50 protesters marched to the mansion where the meetings were held. Riot police on snow mobiles easily guarded the venue, built on a hilltop in a wilderness park 20 kilometers outside this Canadian capital city. A few activists banged pots and pans in imitation of Argentine street protesters.
Canadian finance minister Paul Martin, who chaired the sessions, said the IMF was the only agency that can help Argentina now.
"There is a recognition that Argentina has taken a number of important steps, but that obviously much more remains to be done," Martin said. "We obviously stand ready to support Argentina in their discussions with the IMF and are very hopeful that they will result in a satisfactory outcome."
"The situation in Japan is one of some difficulty," Martin said. "Europe is continuing to look up a bit, although the situation in Germany continues to be slow."
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