BERLIN – Germany's finance minister said Saturday that he and the U.S. Treasury Secretary (search) have reached an agreement under which Iraq's creditors would write off up to 80 percent of Iraq's debt, capping a months-long U.S. push for debt forgiveness.
Finance Minister Hans Eichel (search) said a meeting with Treasury Secretary John Snow "created the basis on which the forgiveness of Iraqi debt can be settled mutually in the Paris Club (search)" of creditor nations, which is owed about $42 billion by Iraq.
"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 ministers from the Group of 20 major economies.
"Within this framework, the necessary decisions can now be taken in the Paris Club," Eichel said. He did not elaborate and took no questions.
The German-U.S. agreement was being discussed Saturday by the Paris Club and "our expectation is that it will be accepted," said Eichel's spokesman, Joerg Mueller.
The United States has been pushing for a generous debt write-off for Iraq, trying to win support for wiping out as much as 95 percent of its debt.
However, other governments, including Germany, have questioned whether a country rich in oil should benefit from huge debt reduction. France, which strongly opposed last year's U.S.-led war to oust Saddam Hussein, 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.
Iraq has said its overall foreign debt of $122 billion is hindering postwar reconstruction.
The Paris Club of creditor countries includes Austria, Australia, Belgium, Britain, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, the Netherlands, Norway, Russia, Spain, Sweden, Switzerland and the United States.
Iraq also owes $80 billion to various Arab governments.
Eichel was keen to stress that the planned Iraqi debt write-off "is not a precedent for any other case."
"We only see a special situation for Iraq," he said.
Thirty 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.