U.S., Europe May Work to Limit Iraq Debt

The Las Vegas Sun ^ | June 23, 2004 at 16:37:02 PDT | MARTIN CRUTSINGER

[Ernest_at_the_Beach]

WASHINGTON (AP) - The United States and Europe will pledge to work toward reducing Iraq's massive foreign debt by year's end although differences remain over the size of the relief package, European officials said Wednesday.

The officials said a two-page joint statement on Iraq would be issued at the end of a one-day U.S.-European Union summit that President Bush will attend Saturday at Dromoland Castle in Ireland.

The debt portion of the agreement will have the United States and the EU seeking to work toward cutting Iraq's estimated $120 billion in foreign debt. The Bush administration believes that reducing the debt is critical to give the new interim Iraq government, scheduled to take over on June 30, a chance to revive the country's war-torn economy.

Philippe Coessens, political counselor for the EU in Washington, told reporters at a briefing that the joint declaration would pledge to implement a debt-relief program as part of an economic support program from the 184-nation International Monetary Fund.

The IMF recently completed an assessment of how much debt Iraq could carry and still have sufficient resources to rebuild the country's economy. That assessment has not been made public.

Officials at the briefing said no agreement had been reached on just how much debt would be forgiven.

The United States has been pushing for a significant reduction in the range of forgiving two-thirds of Iraq's debt, but has run into opposition from other countries, notably France. Those countries argue that this would set a bad precedent since the United States and other wealthy nations are participating in a program that would forgive only about half of the debt held by the world's poorest nations.

The issue was an agenda topic at the recent Group of Eight economic summit on Sea Island, Ga., earlier this month.

While the United States and Britain hoped to strike a deal that would link larger debt forgiveness for poor nations to greater debt relief for Iraq, in the end France objected, saying with its oil revenues Iraq is potentially a wealthy country.

French President Jacques Chirac asked, "How would you explain to these people that in three months we are going to do more for Iraq than we have done in 10 years for the 37 poorest and most indebted countries in the world?"

The issue of debt relief for Iraq is being handled by the Paris Club of 19 wealthy nations who negotiate collectively with debtor countries on debt relief terms. The Paris Club nations hold about $42 billion of Iraq's debt.

The EU officials said the joint statement on Iraq will pledge economic support to help Iraq's interim government proceed toward elections.

Bush will appeal to allied leaders next week to send a NATO force to Iraq to bolster the U.S.-led coalition, according to two senior administration officials who spoke on condition of anonymity.

Bush will discuss specific roles NATO could handle ranging from training Iraqi security forces to protecting U.N. personnel in Iraq, one of the officials said. The discussions will take place at a NATO summit in Istanbul, Turkey, that Bush will attend Monday and Tuesday.

During his meetings in Ireland with Romano Prodi, head of the European Commission, and Irish Prime Minister Bertie Ahern, whose country currently holds the six-month EU presidency, Bush is expected to push for the EU to consider Turkey's bid to become a member of the EU.

The EU briefers said the EU is scheduled to decide this December whether Turkey meets the qualifications for membership. If that assessment is positive, then negotiations could begin soon afterwards, they said.

This year's U.S.-EU summit is the first to be held since the EU enlarged from 15 countries to 25 on May 1.

On the economic side, the United States and the EU are expected to sign a cooperation agreement that will allow Europe's Galileo satellite system to go forward. The Galileo program is a joint venture of the European Commission and the European Space Agency and will be Europe's answer to the American global positioning system, or GPS.

The European satellite system is expected to be operational by 2008 and will be the first satellite navigation system designed specifically for civilian use worldwide. The U.S. GPS system and a Russian system were originally designed for military use.

[stylin19a]

French President Jacques Chirac asked, "How would you explain to these people that in three months we are going to do more for Iraq than we have done in 10 years for the 37 poorest and most indebted countries in the world?"

um....this is Iraq's first time in debt forgiveness. The other countries get their debt forgiven on a regular basis, only to take on new debt that they never repay.