FRENCH REACTION:FRENCH OFFICIALS said Paris would not follow a British proposal to provide medium-term guarantees for interbank lending, casting fresh doubts on the ability of the world's seven richest nations to present a common front when their finance ministers meet in Washington today.

The Group of Seven (G7) finance ministers are keen to correct the impression of disarray caused by unco-ordinated government action to tackle the international financial crisis. However, both a persistent transatlantic rift and continued inter-European squabbling on how to forge ahead are threatening to undermine their efforts.

The latest disagreement follows a suggestion yesterday by British prime minister Gordon Brown that all members of the G7 adopt a UK initiative to offer state guarantees, on commercial terms, to back interbank lending.

A French official said the government believed the interbank lending market was not as paralysed in the euro zone as it was in the UK and that the European Central Bank had so far succeeded in propping up such lending by providing liquidity.

The US also poured cold water on the proposal. US treasury secretary Hank Paulson said the leading economies had "different needs" and so "it would not make sense to have identical policies".

An official close to German chancellor Angela Merkel said Berlin had no plans to adopt the British suggestion but did not rule it out.

The spat could undermine a week of efforts by European governments - led by France, Germany, Italy and the UK, the European members of the G7 - to present a common front in tackling the financial storm. - (Financial Times service)