France, Germany Offer Iraq Relief; Debt Reduction Promised after Meetings with U.S. Emissary

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Less than a week after President Bush said nations that opposed the Iraq war would be barred from lucrative reconstruction contracts, France and Germany said yesterday after meetings with U.S. envoy James A. Baker III that they will offer substantial debt relief to Iraq.

Mr. Baker met yesterday in Paris with French President Jacques Chirac and in Berlin with German Chancellor Gerhard Schroeder, and afterward the three nations released a joint statement on how to handle Iraq's staggering $120 billion of debt.

"Debt reduction is critical if the Iraqi people are to have a chance to build a free and prosperous Iraq," the statement said. "Therefore, France, Germany and the United States agree that there should be substantial debt reduction for Iraq in the Paris Club in 2004, and will work closely with each other to achieve this objective."

Under the rule of dictator Saddam Hussein, Iraq amassed debts of $3 billion to France, $2.4 billion to Germany and $2.2 billion to the United States. Overdue interest payments nearly double some of the debts. In all, Iraq owes about $40 billion to the 19 wealthy nations that make up the Paris Club, a French-led group of official creditors who help debtor nations. Other countries and private creditors are owed at least $80 billion in addition.

While the statement was vague - "The exact percentage of debt reduction that would constitute 'substantial' debt reduction is subject to future agreement between the parties," it said - the White House yesterday applauded the move by France and Germany.

"We appreciate the commitments they made on the need to restructure and reduce the debt burden," White House Press Secretary Scott McClellan told reporters.

Sources close to the White House say the administration is seeking relief of about two-thirds of the debt owed by Iraq.

With an estimated $8.6 billion worth of reconstruction contracts funded by U.S. taxpayers set to move ahead in the coming months - which only nations that supported the U.S.-led coalition can tap - France and Germany have made a swift effort to call a truce with the United States

The capture of Saddam - which many experts believe will, after a short period of heightened attacks by holdouts of the dictator's Ba'athist regime, lead to long-term stability in Iraq - also appears to have played a role in the sudden amiability of the two most vehement critics of the war.

"Germany and the United States are - like France - ready not only for a rescheduling, but also a substantial lifting of Iraq's debt," said a spokesman for the German chancellor. A spokesman for the French leader said Mr. Chirac agrees "on the need for finding the means to reduce Iraq's debt in 2004 in the Paris Club, in accordance with the appropriate conditions."

But the White House gave no indication that debt forgiveness by the two opponents of the Iraq war would result in either getting a piece of the lucrative reconstruction contracts. …