G-8 summit: France, Germany oppose US effort to relieve Iraq of external debt

Published June 9th, 2004 - 02:00 GMT

The Bush administration on Tuesday hinted it would press other members of the Group of Eight industrialized nations to relieve Iraq of its some $120 billion external debt. 


US experts claimed forgiving these debts would constitute both an historic contribution to the economic development of post-Saddam Iraq and a major gesture of support for the Iraqi people. 


An American official noted that the International Monetary Fund had said the "vast majority" of Iraq's debt needs to be forgiven and added that the US would back that position. But Germany and France have indicated they are not willing to go beyond forgiving half of the Iraq debt.  


The most comprehensive study of Iraqi debts, by the Center for Strategic and International Studies (CSIS), calculated Iraq's total debt to be $127 billion, of which $47 billion is accrued interest. Iraq owes a further $199 billion in Gulf War compensation and $57 billion in pending contracts signed between the Saddam Hussein regime and foreign companies and governments. Iraq's overall financial burden, according to the CSIS figures, is $383 billion. 


Based on these figures, Iraq's financial obligations are 14 times its estimated annual gross domestic product (GDP) of $27 billion--a staggering $16,000 per person. 


Some 30% of Iraq's debt is owed to the Paris Club, an informal group of industrialized creditors that meets monthly with debtor nations to discuss debt restructuring.  


In Paris, French officials were quoted as saying it was impossible for "political reasons" to forgive 80 to 90% of the debt, noting that debt cancellations traditionally only amount to two-thirds of the total. 


Sources in the French president's office told AFP, it would be difficult to explain to Nigeria, Indonesia and other debtor nations why Iraq had been given more over the course of a year than the rest of the world's poorest states combined.  


On his Part, German Chancellor Gerhard Schroeder said he was prepared to reduce the Iraqi debt "substantially" through the Paris Club. In exchange, however, Schroeder said German firms should be able to benefit from Iraq reconstruction projects. (menareport.com)

© 2004 Mena Report (www.menareport.com)

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