Washington Finance leaders directed the International Monetary Fund on Saturday to develop a dramatic new approach to resolving debt crises that have engulfed countries from Asia to South America.
The goal is creation of a process by which nations with unmanageable debt could declare bankruptcy and force creditors to negotiate more lenient repayment terms.
The order for the 184-nation IMF came from the lending institution's policy-setting committee of finance ministers.
The step is a milestone in overhauling the global finance system. The effort has moved in fits and starts since the Asian currency crisis of 1997-98 pushed 40 percent of the world's economy into recession.
The announcement was likely to be the biggest achievement of this year's annual meetings of the IMF and World Bank.
The meetings came against a backdrop of rising worries about the uncertain economic recovery from last year's recession. Chief concerns are plunging stock markets, Latin America's debt crisis and possible war in Iraq.
The finance ministers who serve as the IMF's board of directors sought to allay those fears. Treasury Secretary Paul O'Neill said "handwringers" were ignoring positive economic developments.
But efforts to project an optimistic front were undermined by mixed signals by financial officials from Japan about how Japan planned to deal with its troubled banking sector and revive the world's second largest economy.
As in the past, the meetings attracted thousands of anti-globalization protesters who contend the institutions' policies favor wealthy nations.
Authorities widened their security perimeter Saturday in Washington. Only a handful of arrests were reported by Saturday night, a sharp contrast to the 649 taken into custody Friday.
While critics of the two organizations complained that the wealthy nations were not putting up sufficient money to help poor countries, World Bank President James Wolfensohn rejected that view. He said the United States and European Union have pledged a combined $12 billion increase in foreign aid over the next three years, which he said would be enough to launch iniatives in a number of areas to achieve the United Nations' goals of cutting world poverty in half by 2015.
The issue of debt burdens moved to the top of the IMF's agenda after Argentina was forced into a record default on the bulk of its $141 billion in foreign obligations in December. Argentina has yet to win an IMF agreement for new loans; the country has complained about what it maintains are unreasonable terms the IMF is seeking to impose.
The IMF's policy group said it was ready to help Argentina, but only after the country adopted a sustainable economic program.