Reuters
November 19, 2004

Paris: The Paris Club of creditor nations on Friday pressed on with talks aimed at ending a transatlantic dispute over how much of Iraq’s debts to waive, but showed scant sign of closing a deal after negotiating for most of the week.

The 19 countries are trying to close a gap between the 90-95 percent write-off Washington has pushed for and France’s proposal that the leading creditors should initially cancel half of Iraq’s debts and then review the situation after three years.

“There was a meeting yesterday, there was a meeting the day before yesterday, there was a meeting the day before, there is one today. The work of the Paris Club is continuing,” French Foreign Ministry spokesman Herve Ladsous told a regular briefing.

A dispute over the issue at a meeting of finance ministers from the Group of Seven (G7) rich countries last month revived lingering tensions between Washington and Paris over the U.S.-led war, which France opposed.

The G7 countries – the United States, Japan, Germany, Britain, France, Italy and Canada – are all Paris Club members.

France argues that Iraq has the world’s second-largest oil reserves and should not be treated like impoverished African nations without such natural resources.

The United States says Iraq needs enormous debt relief to get back on its feet and become economically viable.

The International Monetary Fund has put Iraq’s total pre-war debt at $120 billion, some $40 billion of which is in arrears to Paris Club member nations. An accord on Iraq debt forgiveness at the Paris Club could serve as a benchmark for relief deals with other creditors such as Saudi Arabia, Kuwait and eastern European states.

Officials at the Paris Club, an informal grouping that seeks sustainable solutions to the payment difficulties of debtor countries, say they are aiming to reach a deal by the end of this year.

At the October G7 meeting, French Finance Minister Nicolas Sarkozy said Russia, Germany and Italy all backed his proposal that leading creditors initially waive half of Iraq’s debts and revisit the issue after three years.

Britain’s finance minister, Gordon Brown, appeared to show support for the U.S. position on Tuesday, saying the “vast majority” of Iraq’s debts should be forgiven.