G7 - countries can go bust

COUNTRIES could be forced into company-style 'bankruptcy' if they default on loans, under a plan agreed to at the weekend by finance ministers from the Group of Seven richest nations. Chancellor Gordon Brown hailed the action plan a 'breakthrough'.

The plan could mean an end to the multi-billion dollar International Monetary Fund rescue plans, as seen in Korea and Mexico. Instead the Fund would become a global 'lender of the last resort', providing temporary financing.

Lenders to developing nations would incorporate 'contingency clauses' into bonds and loan contracts, which could trigger reorganisation of debts and 'Chapter 11' style administration if a majority of creditors agree.

The plan comes too late to resolve the worsening economic problems of Argentina. Little progress was made at the Washington meetings on that country's crisis, despite extensive talks by the G7 and the IMF with finance minister Jorge Remes Lenicov.