Major differences of opinion emerged over the weekend between the German and Italian foreign ministers over the best approach to helping Russia to escape from the financial black hole which threatens to swallow the struggling Russian economy.
The Italian foreign minister, Lamberto Dini, was quoted on Saturday as saying that a moratorium on Russia's estimated $150bn (pounds 90bn) of foreign debt is inevitable, because it is hardly possible for Russia to meet its short-term obligations.
Mr Dini said the EU should give "some kind of reconsideration to Russia's foreign debt."
However Klaus Kinkel, the German Foreign Minister, speaking at the EU foreign ministers' meeting in Salzburg, Austria, yesterday was quick to reject the idea of a moratorium.
"We must help Russia in difficult times but we mustn't immediately move towards a moratorium," said Mr Kinkel. He said that until now Russia had been a reliable debtor and it was important that it continued to service its debts to Germany. German banks are estimated to have lent some DM54bn (pounds 18bn) to Russia.
The public disagreement between the two European statesmen took much of the gloss off a recommendation that three EU foreign ministers - Mr Kinkel, Austria's Wolfgang Schussel and the UK Foreign Minister, Robin Cook, should fly to Moscow as soon as possible to discuss the growing crisis.
But there is no lack of scheduled debate on the issue. The deputy finance ministers of the Group of Seven nations will meet in London over the next 10 days to consider the implications of the Russian crisis, a Treasury spokesman said yesterday.
The meeting has been called by the UK in its role as the current chairman of the G7, which lasts until the end of the year.
The crisis will also be discussed by the meeting of finance ministers in Vienna at the end of September, by ministers at the annual Commonwealth conference in Ottawa, and by the Group of Seven again when it gathers in Washington for the annual meetings of the International Monetary Fund and the World Bank early next month.
But the official UK policy towards Russia remains that the country should elect a new government to take control of policy and implement the economic reforms it undertook to make in order to secure a financial support package from the IMF in July.
Russia's central bank chairman, Sergei Dubinin, said that Russia would not default on its foreign debt. He told The Independent on Sunday at the weekend that Russia would do its best to meet its obligations even if the IMF broke off its loan programme.
But reports were circulating in London over the weekend that the London- based European Bank for Reconstruction and Development (EBRD) would this week be forced to write off loans larger than the pounds 250m written off last month by Barclays Bank.
In the absence of any strong initiatives to resolve the crisis, the markets face a continuation of the slide of last week. The Tokyo market faces further bad news from companies reporting in the next few days and uncertainty over proposals to stabilise Japan's ailing financial system.Reuse content