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Germany’s finance minister has said that he and the US treasury secretary have reached an agreement under which Iraq’s creditors would write off up to 80% of Iraq’s debt, capping a months-long US push for debt forgiveness.
Finance minister Hans Eichel said a meeting with treasury secretary John Snow “created the basis on which the forgiveness of Iraqi debt can be settled mutually in the Paris Club” of creditor nations, which is owed about US$42bn by Iraq.

“We agreed that there should be a write-off of debts in several stages amounting to 80% in total,” Eichel said. “Within this framework, the necessary decisions can now be taken in the Paris Club.”

The US has been pushing for a generous debt write-off for Iraq, trying to win support for wiping out as much as 95% of its debt.

However, other governments, including Germany, have questioned whether a country rich in oil should benefit from huge debt reduction. France, which strongly opposed last year’s US-led war to oust Saddam Hussein, has previously proposed that the Paris Club write off half of the debt, postpone debt service for three years and revisit the issue when Iraq’s economy is in better condition.

Iraq has said its overall foreign debt of US$122bn is hindering postwar reconstruction.

The Paris Club of creditor countries includes Austria, Australia, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, the Netherlands, Norway, Russia, Spain, Sweden, Switzerland, UK and US.
Iraq also owes US$80bn to various Arab governments.

Eichel was keen to stress that the planned Iraqi debt write-off “is not a precedent for any other case.”

“We only see a special situation for Iraq,” he said.

Some 30% of Iraq’s debt would be written off immediately, another 30% in a second stage “tied to a programme of the International Monetary Fund” and a further 20% “linked to the success of this programme,” he added.