The San Diego-Union Tribune/Reuters
October 27, 2003

Berlin: Germany said on Monday it won’t consider forgiving Iraq’s debt to Berlin of some 4.4 billion euros ($5.18 billion) but that a temporary freeze on servicing payments could be discussed by the Paris Club of creditor governments.

“A complete debt forgiveness by the German government can scarcely be considered,” government spokesman Thomas Steg told a news conference in Berlin.

“It is certainly right to say that if the reconstruction of Iraq can be helped by a debt moratorium then the Paris Club is the right place to consider the question,” he told reporters. Iraq’s potential oil wealth means it should not be treated in the same way as the world’s poorest nations in debt negotiations, Steg said. The nation’s reconstruction should be funded by those potential riches, he added.

Steg was responding to a report in Monday’s Handelsblatt newspaper which said Germany would be prepared to help Iraq by renegotiating some of its $100 billion plus foreign debt, but only once an administration controlled by Iraqis is in place. Berlin was also considering debt forgiveness, the paper said.

Germany, along with France and Russia, brought no new aid to last week’s Iraq donor conference in Madrid, which aimed to raise the $56 billion the World Bank and the United Nations have said is needed over four years for the nation’s reconstruction.

“The government has been very clear on what it is providing in terms of aid towards the reconstruction of Iraq,” Steg said. “Around 200 million euros – that is not an inconsiderable sum.

U.S. Treasury Secretary John Snow said on Monday he had made progress during bilateral talks at G20 meetings in Mexico on the issue of restructuring Iraq foreign debt, and that France had already begun to deal with the issue under the Paris Club process.

“I had a good conversation with Minister (Francis) Mer of France, who indicated that the process was well underway, that they were already working the numbers,” Snow told reporters following the conference of G20 nations in Morelia.

“And with the other countries … Germany, Russia … we had good discussions and they affirmed their willingness to work through the Paris Club process,” he said.

Snow, who traveled directly to Morelia from the donor conference in Madrid, said the Spain meeting “marked significant progress for freedom in Iraq.

“I was extremely pleased to see 73 nations and 20 international organizations that came together to meet the challenge of helping the Iraqi people recover from decades of oppression and build a better future,” he said in an official statement. “The contributions pledged in Spain will help bring necessary funds, goods and services to the Iraqi people.”

Snow said he met bilaterally with several countries over the weekend to advance the discussions.

Germany’s stance on Iraq’s debt mountain echoes that of Japan. Tokyo on Friday poured cold water on campaigners’ calls for debt forgiveness, saying such a move would send bad signals to private investors.

Japan is owed $4.1 billion in principal out of a sum of $21 billion owed to Paris Club countries, who are cooperating to restructure Iraq’s debt. The Paris Club figure rises to $42 billion when interest arrears are included.

Activists such as debt-cancelling campaigners Jubilee are calling for some of Iraq’s debt to be written off, saying it is “odious debt” – a legal term meaning it was contracted without the consent of the people and not spent in their interests.

(Additional reporting by Pav Jordan in Morelia, Mexico)