LONDON (AFP) - The Group of Seven industrialised countries broke new ground here yesterday as they for the first time expressed readiness in a formal statement to provide 100 per cent debt relief for the world's poorest nations.

The pledge came at the end of a two-day meeting of G7 finance ministers and central bankers during which a US-Europe rift threatened to torpedo a British-led initiative to tackle global poverty, dubbed a modern day Marshall Plan.

"This is the first time as much as 100 per cent debt relief has ever been detailed in a G7 communiqué," Brown told reporters at the meeting's conclusion.

In a statement, finance chiefs from Britain, Canada, France, Germany, Italy, Japan and the United States said G7 countries were "agreed on a case-by-case analysis of HIPC countries, based on our willingness to provide as much as 100 per cent multilateral debt relief".

The Heavily Indebted Poor Countries Initiative (HIPC) is a joint project of the World Bank and the International Monetary Fund (IMF) that offers debt relief to the world's most impoverished nations that agree to undertake economic reform.

Brown, whose government holds the current presidency of the G8 - the G7 plus Russia - added that for the first time the IMF was looking to the use of its gold to help finance debt relief.

Britain wants the world's richest countries to cancel the $80 billion of debts owed by poor nations to the IMF, the World Bank and the African Development Bank. It believes the IMF can help achieve this by revaluing its massive gold holdings.

The G7 meeting had gotten off to a tense start yesterday amid deep divisions and deadlock between Europe and the United States on how to stamp out global poverty despite a vibrant personal appeal for action by former South African president Nelson Mandela to G7 finance ministers in London the day before.

Ministers had Friday met with Mandela who urged them to back a doubling in annual development assistance to $100 billion and to approve 100 per cent debt cancellation for Africa.

But in subsequent talks, according to German secretary of state for finance Caio Koch-Weser, "the Americans (were) in a completely different frame of mind from the Europeans".

The United States meanwhile repeated its opposition to the British-led plan but said said it supported providing debt relief to the poorest countries.

"The US is committed to poverty reduction for heavily indebted countries but we cannot support the IFF," US Undersecretary of the Treasury John Taylor told a news conference yesterday.

US officials have cited legal problems in connection with Brown's plan, known as the International Finance Facility (IFF), and have pointed to their own proposals for debt cancellation and the transformation of World Bank loans into grants.

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