Summit threatens Karadzic

World leaders issued a fierce ultimatum to the Bosnian Serb leader, Radovan Karadzic, yesterday, calling on him to step down immediately, and warning of sanctions if he did not. In a special statement on Bosnia issued at the end of their annual summit, the Group of Seven industrialised countries said the "presence in public office of indicted war criminals" was an "open violation of the peace agreement".

"We insist," the statement said, "that Mr Karadzic step down immediately and permanently from all public functions and take no part in government decisions." A separate paragraph referred to the provision for sanctions contained in UN Security Council Resolution 1022 and said: "We are ready to consider the application of sanctions instruments to any party in the peace agreement."

Elaborating on the warning to Mr Karadzic, John Major said there had been "complete unanimity" among the seven leaders on the need to remove Mr Karadzic. He denied that there was a deadline of Monday for Mr Karadzic to leave office, but said that it should be a matter of days. He indicated that sanctions would be applied first against the Bosnian Serb republic, but could then be extended to Serbia proper.

The stand on Bosnia was the single strongest point of agreement at Lyons after the unanimous statement on terrorism issued on the first evening of the summit. That was the G7's response to the bomb attack on US servicemen in Saudi Arabia. Yesterday, within hours of the presumed IRA attack on British troops in Germany, the Group of Seven formally endorsed a 40-point plan for combating terrorism and organised crime, compiled at the behest of the last G7 summit in Canada. This is expected to be carried forward at a special ministerial-level meeting on terrorism to be held in Paris next month.

The Russian Prime Minister, Viktor Chernomyrdin, who joined the seven leaders for the political part of the summit, endorsed the statement on terrorism, and French officials suggested that Russia could be represented at the Paris meeting. Mr Chernomyrdin was standing in for President Boris Yeltsin, who had decided to stay in Russia for the last stages of the election campaign.

While the beginning and end of the G7 summit were marked by complete unanimity on terrorism and Bosnia, the economic part of the gathering elicited sharp disagreements. A general agreement to increase help for the most indebted countries brought discord between France, Britain, the US and Canada, which want the IMF to sell a small part of its gold reserves to help repay some Third World debts, and a second group consisting of Germany, Japan and Italy, which believe this would undermine the IMF's credibility. IMF sources indicated that opposition to the sales was strong enough to block the proposal.

The US found itself in the dock over the new Helms-Burton law, which punishes foreign as well as American companies if they trade with Cuba. Washington also appeared to be isolated in its opposition to Boutros Boutros- Ghali serving a second term as UN Secretary General. While the summit host, President Jacques Chirac, paid tribute to Mr Boutros-Ghali's efforts at the UN, American officials made clear their dissatisfaction with cost- cutting and restructuring measures and said their opposition remained.