Group of Seven Closer to Aid Pact for Russians : Economy: But, there is disagreement over how to avert a threatened global recession.

WASHINGTON —  The United States and its rich allies looked set to agree Sunday on a massive aid program for Russia but faced an uphill task sorting out their differences over ways to avert a threatened global recession.

The Bush Administration, worried that weak growth overseas could undermine the fragile U.S. recovery ahead of November elections, has strongly urged its partners in the Group of Seven to pump up their sagging economies.

But neither Japan nor Germany seemed to be listening.

“The Bundesbank has no room to cut interest rates,” German central bank Governor Helmut Schlesinger told reporters before a meeting of economic policy-makers from the G7.

British officials said they expect the seven--Britain, Canada, France, Germany, Italy, Japan and the United States--to endorse the establishment of a $6-billion fund to help Russia stabilize its currency, the ruble.

But the fund won’t come into effect until Russia reaches agreement with the International Monetary Fund on a tough program to transform its economy to capitalism.

The expected establishment of the ruble fund has been overshadowed by a spat between the United States and Germany over how best to spur global growth.

Washington has complained that Germany’s mix of big budget deficits and high interest rates is dragging down growth in all of Europe and hurting the world economy.

German Finance Minister Theo Waigel defended his country’s policies Sunday and said German growth could exceed 2% this year after a strong showing in the first quarter.

“We have no recession,” he said.

Waigel acknowledged that German unification had increased the budget deficit, but pointed out that his country was financing this from its own pocket.

“We are financing this from our own savings. We are not taking money away from anybody,” he told reporters.

That contrasts with the United States, which is dependent on money from abroad to help finance its $400-billion budget deficit.

The United States has tried to link the two issues of world growth and Russian aid, arguing that it will be easier for the former Soviet Union to carry out its reforms if the world economy is recovering.

Yegor Gaidar, the architect of Russia’s economic reforms, met the G7 on Sunday and sought to reassure the group that Moscow remained committed to overhauling its battered economy.

Russia launched a bold economic reform plan at the start of this year, freeing prices for most goods and promising to bring ballooning public sector deficits under control.

At a dinner Saturday, when the G7 was briefed by the heads of the International Monetary Fund and the World Bank, concern was expressed that Moscow might be backsliding on its plans, Canadian Finance Minister Don Mazankowski said.

Gaidar told journalists Saturday that he felt Russia deserved to win Western financial support.

“We are doing enough,” he said.

G7 nations though are likely to ask Russia to do more, although they may differ over how hard to press the issue.

In a sign that the United States might favor a softer approach, U.S. officials have stressed the difficulties Russia faces in transforming its economy.

Japan, in contrast, has made clear that Russia needs to carry out tough reforms if it wants to have any chance of winning further international financial support.

“Without Russia’s own initiative and determination for economic reform, we cannot just keep pouring in cash, hoping it will be used efficiently,” a senior Japanese official said.

The United States and Japan also seem to differ over the best prescription for what ails the world economy.

Japanese officials seemed as determined as their German counterparts to resist U.S. pressure to do more to pump up growth, despite the collapse in the Tokyo stock market.

“We have absolutely no plan to ease monetary policy,” a source with the Japanese delegation to the G7 said.

Japanese sources said Tokyo will continue to monitor the effects of its recent discount rate cut and other stimulative measures, implying it is too early to do more.

With little change likely in short-term interest rates, officials said the G7 nations are more likely to underscore their commitment to looser goals, such as measures to encourage world savings and keep currencies stable.