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Blow to Chancellor as US snubs his `Marshall Plan' for Africa

The United States dealt a damaging blow to Gordon Brown yesterday, rejecting one of his key proposals to tackle African poverty.

The Chancellor sought to put on a brave face after a G7 finance ministers meeting in London broke up without agreement for an International Finance Facility (IFF).

The US Treasury under-secretary, John Taylor, left the meeting saying Washington opposes Mr Brown's plan, which would see the G7 underwrite a major investment boost for the continent.

"The IFF is something that the US cannot support because of our legislative process," Mr Taylor told reporters after the meeting. "This particular mechanism does not work for the US. It works for other countries, and that is fine."

Mr Taylor said: "We focus on the results on the ground rather than fractions of gross domestic product [devoted to aid]. We have never thought that fractions of GDP are a very good way to generate funding for aid. The American people are very generous. We feel as if we have a good way to provide assistance the way we are doing now."

Instead, Mr Brown was left hailing an agreement to offer up to 100 per cent debt relief to some countries. He said the IMF would also work on proposals for using its substantial gold reserves - likely to include gold sales - to help the debt relief effort.

"London 2005 will in my view be seen as the 100 per cent debt relief summit," the Chancellor said. "It is the richest countries hearing the voices of the poor. It is the first time that as much as 100 per cent debt relief has ever been detailed in a G7 communique."

Although Mr Brown insisted that support for the IFF was growing, the US stance is a big setback. If approved in full it would see around pounds 5.38bn a year invested in African projects in loans backed by the G7.

The IFF is a key part of Mr Brown's "Marshall Plan" for Africa, launched last month at the start of Britain's presidency of the club of rich industrialised nations.

Hilary Benn, the International Development Secretary, said it was still possible for it to be agreed by the end of Britain's presidency of the G8 (G7 plus Russia) later this year at a summit in Scotland.

"You don't need everyone on board to launch the IFF. It is inconceivable that the world will come to Gleneagles without finding ways of raising the additional money we know is needed," he said.

Jason Nisse, Business, page 2