Argentina has won the support of the G7 group of leading industrial nations for its efforts to reopen the flow of international loans to the country, foreign minister Carlos Ruckauf has said.

Argentina has been cut off from foreign loans since it carried out the biggest ever default by an international borrower a year ago after people rioted against austerity measures.

Since then, talks with the International Monetary Fund (IMF) have failed to reach agreement on resuming aid.

But Mr Ruckauf said the US State Department had told him the G7 had "decided to help the IMF and Argentina reach a deal as soon as possible."

Important player

He made the remarks in a local television interview.

The G7 is the biggest shareholder in the IMF so its support for any package of measures could carry considerable weight.

However, it remains unclear whether there is a deal on the table.

When an IMF team last visited Argentina for talks in December 2002, the country's president played down the likelihood of progress.

"I don't think we should build expectations over this visit," said Argentine President Eduardo Duhalde. He described the talks as "purely technical".

Since then the Argentine Senate has passed the government's 2003 budget, though with amendments that water down some austerity taxes.

The G7 is believed to be discussing backing a short-term agreement between the IMF and Argentina, which is entering its fifth year of recession.

Grassroots anger

The IMF has insisted that the Argentine authorities must show they are serious about trimming state spending and protecting foreign investors before loans can resume.

The Argentina government faces a difficult balancing act as popular protests against government restrictions on bank withdrawals and other austerity policies have continued.

"The IMF favours an agreement...The order from the G7 to the IMF is that they reach a deal soon," Reuters news agency quoted an Argentine official who did not wish to be named as saying.

But an agreement is thought unlikely to mean fresh loans. Analysts think a timetable for rescheduling existing debt repayments is more probable.

Bankrupt Argentina was once known as the bread basket of Latin America, but unemployment is now over 20%, and there have been deaths from starvation.

The peso has lost 70% of its value since the government devalued the currency in January 2002, making imports more expensive and contributing to soaring inflation.