Blair Hails G8 Step to Poor Nations Debt Relief

Tony Blair was last night hailing success for the attempt by Britain and America to secure deeper debt relief for the world's poorest nations, after the G8 summit unveiled a package of measures at the end of its three-day meeting.

In a summit overshadowed by renewed tensions between the US and France over Iraq, British sources said the final communique had removed obstacles to a big push on debt during the UK's presidency of the G8 next year.

They said the way was clear for finance ministers to draw up plans to provide 100% forgiveness for Africa's most indebted countries and work was underway on how to finance more generous relief. Debt campaigners said the test of the prime minister's commitment would be a hefty boost to aid in the looming public spending round.

Mr Blair, who was bracing himself for poor results in yesterday's elections, took heart from the completion of initiatives at the summit on the Middle East, HIV/Aids, trade, non-proliferation and peacekeeping, as well as debt. His return to the UK was delayed by his attendance today at Ronald Reagan's funeral.

The White House last night sought to smooth over President Bush's public disagreement with the French president, Jacques Chirac, over America's desire to see Nato troops deployed in Iraq. The two leaders met yesterday morning for what a senior Bush administration official described as cordial talks.

"I think it's fair to characterise the positions as moving carefully in the same direction. What we did not hear is a firm red line of noes. We did hear some interest in consultation and possibly finding a suitable role for Nato."

The summit agreed to extend the time limit for nations to apply for debt relief under the HIPC (highly indebted poor country) initiative until the end of 2004 and will boost the funding of the programme by $1bn (£54.6m).

Britain and the US, however, are keen to extend debt relief to money owed to the International Monetary Fund and the World Bank, and viewed last night's statement as a green light to press ahead.

"We're pleased. The key thing is that we got it on the agenda", said one UK official. "We now have the chance to push harder."

Debt campaigner Bob Geldof said: "If they do go ahead and eliminate multi-lateral debt it will be a massive step forward. It is profound in its implication and the logical next step should be to dismantle trade barriers. It's feasible and could be financed by the sale of IMF gold, which would be a simple bookkeeping exercise."

The chancellor, Gordon Brown, will work with his US counterpart, treasury secretary John Snow, on fully-costed proposals to put to the G8 group of industrial nations and the rest of the international community. One option being considered is the sale of IMF gold to fund some of the expected $1bn-plus annual cost of the plan.

Seth Amgott, of the debt campaign group Data, said: "Tony Blair talked the talk for Africa here in Georgia. But this is irrelevant if he does not walk the walk back in London next week when he and Gordon Brown set the aid budget. The prime minister needs to put money in the bank if he wants his G8 in 2005 to deliver the comprehensive and historic plan that Africa really needs and which will set him and his G8 apart from Georgia and all the others."

In its statement, the G8 leaders instructed finance ministers to look at measures to ensure debt sustainability and called for a report.

The debt of the 42 poorest and most indebted countries amounts to $35bn.