Germany and the United States have agreed on a proposal to write off as much as 80 percent of Iraq's debt, Germany's finance minister said Saturday, following a months-long U.S. push for debt forgiveness.
The accord, worked out by German Finance Minister Hans Eichel and U.S. Treasury Secretary John W. Snow, must still be approved by the Paris Club of creditor nations, to which Iraq owes about $42 billion. "Our expectation is that it will be accepted," said Eichel's spokesman, Joerg Mueller.
"We agreed that there should be a write-off of debts in several stages amounting to 80 percent in total," Eichel told reporters on the sidelines of a meeting of finance officials from the Group of 20 industrial and developing countries.
Eichel said 30 percent of Iraq's debt would be written off immediately, another 30 percent in a second stage "tied to a program of the International Monetary Fund" and a further 20 percent "linked to the success of this program," he said.
The United States has been pushing for a generous debt write-off for Iraq. American diplomats had tried to win support for wiping out as much as 95 percent of the debt.
Other governments, including Germany, have questioned whether a country with extensive oil reserves should benefit from large-scale debt reduction. France 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.
German Chancellor Gerhard Schroeder later stressed that "there is no final outcome. There are discussions, particularly with France," which opposed last year's U.S.-led war in Iraq.
Schroeder appeared to suggest that the write-off could at some point be reassessed.
"If the situation in Iraq improves fundamentally -- Iraq is a rich country with respect to its oil reserves -- we should be able to talk about it again," he told reporters at the meeting.
Eichel emphasized that the planned Iraqi debt write-off should not serve as a precedent for any other country. "We only see a special situation for Iraq," he said.
U.S. and Iraqi officials have said that the country's foreign debt of $122 billion is hindering reconstruction. Iraq also owes $80 billion to several Arab governments.
The Paris Club of creditor countries include Austria, Australia, Belgium, Britain, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, the Netherlands, Norway, Russia, Spain, Sweden, Switzerland and the United States.