Group of Seven partners cool to U.S.-style bailouts

By Glenn Somerville and David Milliken

WASHINGTON/FRANKFURT (Reuters) - U.S. allies on Monday spurned entreaties from Washington that they enact large-scale financial bailouts, saying their banks were not exposed to the same level of reckless lending that put the American economy at risk of a deep recession.

While some European central banks offered more funding for stressed financial markets and Japan said it would offer dollar liquidity, finance ministers from the Group of Seven rich nations, who consulted by phone, issued only guarded promises to cooperate in efforts to keep market turmoil in check.

A day earlier, U.S. Treasury Secretary Henry Paulson had said he was pushing other countries to follow the U.S. effort to enact a $700 billion plan to buy up bad mortgage-related debts that are clogging the financial system.

"We are talking very aggressively with other nations around the world, and encouraging them to do similar things, and I believe a number of them will," Paulson said on Sunday.

But after Monday's conference call with G7 counterparts from Canada, Britain, France, Germany, Italy and Japan, there was no sign any of the other countries planned the same tack.

"We pledge to enhance international cooperation to address the ongoing challenges in the global economy and world markets and maintain heightened close cooperation between finance ministries, central banks and regulators," the G7 officials said in a statement.

However, they showed no appetite for mimicking the U.S. proposal.

"At the moment, I don't think Japan needs to launch a program similar to that of the United States," Japanese Vice Finance Minister Kazuyuki Sugimoto told reporters in Tokyo, echoing comments from France, Britain and Germany.

The European Union also made it clear that it would not be joining a rescue package. EU Monetary Affairs Commissioner Joaquin Almunia told a conference in Slovakia that national governments would have to decide how to proceed on their own.

Neighboring Canada came close to saying the financial mess in the United States was the Bush administration's own fault and that Washington should clean it up on its own.

"You got into a situation in the United States where unfortunately when the market makes profits, those profits go to private interests and when the market makes losses, that becomes the loss of the government," said Canadian Prime Minister Stephen Harper, who faces an election on October 14.

"We don't have that kind of a situation in Canada. We don't have a similar regulatory environment. We have much stronger systems in Canada," Harper said.

CENTRAL BANK BULWARK

Central banks in several regions pushed ahead with measures to liquify cash-starved markets and fend off the global credit squeeze.

The Bank of Japan said it would offer its first-ever dollar funding on Wednesday, drawing on a currency swap line set up last week with the Federal Reserve to pump U.S. dollars into the Japanese market.