Argentina fails to secure emergency funding from G7 nations

Argentina's leaders were forced to return home empty handed to a worsening crisis yesterday after failing to persuade the world's richest nations to provide a fresh multibillion-dollar emergency bail-out.

The head of the International Monetary Fund, Horst Köhler, said he had "strongly reiterated" to Argentina's economy minister, Jorge Remes Lenicov, that any solution had to be based on a sustainable economic policy.

On Friday Argentina, which is facing economic collapse, issued an order closing all banks indefinitely to stem an outflow of deposits.

Instead the Group of Seven nations unveiled a revolutionary new action plan to deal with debt crises in emerging economies that was aimed at cutting back on the need for rescue packages.

The plan, being billed in Washington as "an end to the welfare system for Wall Street", is aimed at preventing crises by persuading countries and their lenders to avert default by rescheduling their debts voluntarily.

Under the plan, which UK officials were yesterday claiming to have brokered, countries would issue new bonds and negotiate new loans with provisions allowing a majority of creditors to approve a restructuring rather than allow just one lender to force a nation into default.

However the G7 plan appears to have stymied a more ambitious IMF plan to establish an international bankruptcy scheme to protect indebted countries from their creditors.