Germany this week rejected a U.S. proposal to use "creative financing" to bridge a $1 billion gap in settlement negotiations with Nazi-era slave laborers.

The German government and more than 50 German companies have offered to pay a total of about $4 billion to settle claims by Jewish organizations representing tens of thousands of concentration camp prisoners who were forced to labor for some of Germany's best-known firms during World War II. Lawyers for the Holocaust survivors have said they will not accept less than $5 billion.

To close the gap, Stuart E. Eizenstat, a deputy treasury secretary who has played an active role in the talks, suggested in a Dec. 6 letter to his German counterpart, Otto Lambsdorff, that Germany consider "creative financing options," such as quickly investing the $4 billion in three- to five-year bonds, which could add several hundred million dollars to the fund by the time it is ready to be distributed.

Eizenstat also urged the Germans to put $100 million of seed money into a Future Fund, established earlier this year to educate the public about the Holocaust, and then to help attract nearly $1 billion in donations from other countries and private companies. The United States offered to contribute $10 million to the fund.

In a written response this week, Lambsdorff expressed concern that the U.S. proposal for the Future Fund would leave German industry with an open-ended financial commitment. He warned that German companies already were on the verge of breaking off negotiations because of "doubts about legal closure." Any agreement must be "final and limited and not be supplemented by pledges for some distant future," he said.

Lambsdorff's letter reflected some irritation at the role of the U.S. government. "I do not understand the degree to which the U.S. government mirrors the demands of class action lawyers when it knows they are well beyond the range of possible agreement," he wrote.

In a written statement to The Washington Post, Eizenstat declined to comment on his "privileged communications" with Lambsdorff. "We are obliged to pursue as many ideas as we can to try and reach a settlement," he wrote. "It would be a tragedy for this initiative to collapse now when the parties are closer than they have ever been to a settlement amount."

Eizenstat and Lambsdorff are to continue negotiations next week. A breakdown in talks could set the stage for boycotts against German companies by Jewish organizations around the world.

While Germany already has paid more than $60 billion in reparations, pensions and other compensation since World War II, many survivors of slave labor have never received a penny.