MercoPress. South Atlantic News Agency

Stern warning form G 7 to Argentina

The Group of Seven more industrialized countries of the world, G-7, meeting in Florida this weekend demanded Argentina abandon its strong bargaining tactics with defaulted sovereign bond holders or run the risk of financial isolation.

In its final release after two days of deliberations regarding mainly the weakness of the US dollars and volatility of world markets, G-7 had time to suggest Argentina gets involved in a "constructive dialogue with its creditors, with the purpose of ensuring a high participation in the restructuring of its debt".

US Treasury Secretary John Snow said it was important Argentina honours its commitments with the IMF and complies with the promised reforms.

The release became public minutes after Argentine Finance Minister Roberto Lavagna left for Miami for a scheduled meeting this Monday with IMF Director General Horst Koehler.

However the announcement came as no surprise to the Argentine government that had been previously warned by French Treasury Secretary Jean-Pierre Jouyet that the president Kirchner administration "must begin a constructive and good faith dialogue with all creditors". Argentina has proposed a 75% cut in the face value of bonds which has been rejected by bond holders.

In Buenos Aires Argentine cabinet Chief Alberto Fernández insisted Argentina was involved in a constructive dialogue with all creditors and were making all efforts for negotiations to prosper, "but is must be clear we're offering what we can effectively pay".

The main issue of the G-7 release was related to the US dollar and excess volatility and disorderly movement in exchange rates. Apparently the US accepts that the US dollar should not further weaken against the Euro and the Japanese yen, but the Bush administration also demanded that the Chinese currency be able to move more freely according to market dictates.

The growing trade deficit with China is an obsession of the Bush administration.

However analysts recall that this is election year in the US and President Bush standing in opinion polls is not as encouraging as desired.