Germany announces plan to slash Iraqi debt (Agencies) Updated: 2004-11-21 10:29 Germany unveiled a breakthrough international plan
to wipe out tens of billions of dollars of Iraqi debt so that the war-torn
country can begin rebuilding in earnest.
 German Chancellor
Gerhard Schroeder (R) and German Finance Minister Hans Eichel. Germany
unveiled a breakthrough international plan to wipe out tens of billions of
dollars of Iraqi debt. [AFP] | The accord,
announced on the sidelines of a Group of 20 meeting of finance chiefs in Berlin,
could see the Paris Club of creditor nations cut up to 80 percent of Iraq's debt
and the interests it owes them.
Technical aspects of it were being thrashed out by the Paris Club members in
the French capital and representatives in Berlin thought that an official
announcement was imminent.
A third of Iraq's crippling 120-billion-dollar international debt burden is
owed to Paris Club members, and France and Germany, along with Russia, have up
until now doggedly refused to go beyond a 50 percent cut.
But speaking in Berlin after meeting US officials, German Finance Minister
Hans Eichel said that a three-phase plan had been agreed upon.
"In the first stage around 30 percent (will be waived) immediately; in the
second stage around 30 percent, tied to an International Monetary Fund
programme, and in the third stage 20 percent, dependent on the success of this
programme," he told reporters.
No further details were immediately available.
Eichel warned that the debt waiver should not be seen as a precedent and is a
"special situation for Iraq", where a fledgling US-backed government is trying
to encourage rebuilding and elections amid chronic insecurity.
In France, meanwhile, where Paris Club talks on Iraq were continuing, French
officials refused to comment on Eichel's announcement but did not deny it.
"We're progressing on an in-principle agreement" on an 80 percent cut, a
source at the Paris Club said on condition of anonymity. "The main difficulties
lie in talks on how to apply it."
Eichel said later: "We haven't been negotiating without the French knowing
exactly what we're doing. It's always been like that."
The debt issue has caused tensions across the Atlantic as US troops battle a
tenacious insurgency in Iraq more than 18 months after going to war, with
Britain alongside, to remove president Saddam Hussein.
US officials welcomed the agreement and expected an announcement soon.
"This is a substantial amount of debt relief," said one senior US official on
condition of anonymity. "It's a good deal for Iraq which wants to get on with
its reconstruction."
Asked if there had been any objections to the accord given that France in
particular had grimly stuck to its guns, the official said: "We have not heard
any country that has objected to the German position on the table."
"The discussion in the Paris Club is now more on the technical side... and we
expect things will be wrapped up soon."
The club had set a December 31 target date to reach an agreement.
If confirmed, the debt reduction deal would come closest to the US and
British positions demanding a 95 percent cut, while France, Germany and Russia
had only ever agreed to halve Iraq's financial commitments to the Paris Club.
French Finance Minister Nicolas Sarkozy has argued that before agreeing to a
reduction of more than 50 percent there must be time to evaluate the overall
Iraqi situation, the price of oil and Iraq's production capacities.
German Chancellor Gerhard Schroeder also hinted Saturday that the final
stages of the relief program could be reconsidered in light of Iraq's economic
evolution as "a country potentially rich" due to its oil reserves.
Iraq's debt to other countries, in particular its Gulf Arab neighbors and
former Soviet-bloc states, such as Bulgaria and Romania, amounts to about 60
billion dollars. Private creditors such as banks and infrastructure suppliers
are owed 20 to 30 billion dollars.
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