Dow Jones Newswires

November 23, 2003

Germany backed debt relief for Iraq by the Paris Club of government creditors as the most effective action European countries could take to help in Iraq’s reconstruction, Monday’s Wall Street Journal reported.

Speaking at a meeting with editors of The Wall Street Journal in New York, German Chancellor Gerhard Schroeder said Germany – to which Iraq owes $5.4 billion to $6 billion in principal and interest – would endorse a reduction of that debt, once Iraq’s security situation and political structure had improved.

The Bush administration welcomed the German stance as an encouraging signal.

Bush cabinet members have been debating whether to press other nations for a huge write-off of Iraq’s obligations – say, 90% – or something less aggressive. So far, top officials have released no target figure.

Germany’s position could put pressure on Russia and France – two major creditors that with Germany opposed military intervention in Iraq – to declare their positions on forgiving debt.

Iraq owes an estimated $40 billion to Japan, Russia, France, Germany, the U.S. and other countries among the 19-nation Paris Club. That sum is made up of $21 billion in principal – all incurred before 1990, when Iraq invaded Kuwait, triggering the Persian Gulf War – and about the same in late interest. Japan is owed $4.1 billion in principal, Russia $3.45 billion, France $2.99 billion, Germany $2.4 billion and the U.S. $2.19 billion, according to the Paris Club Web site. At least $80 billion more is owed to Arab countries and nations outside the Paris Club, according to the World Bank.

The Paris Club deals exclusively with commercial loans underwritten by state guarantees. Commercial loans that aren’t guaranteed can be renegotiated through the London Club, a separate creditor group.

Wall Street Journal Staff Reporters Marc Champion and Michael M. Phillips contributed to this article.