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Last Updated: Tuesday, 16 December, 2003, 18:59 GMT
US gets Iraq debt relief support
US special envoy James Baker (left) with French President Jacques Chirac after their meeting in Paris
James Baker is meeting several European leaders
The US has won agreement from France and Germany on the need to reduce Iraq's debt to help the country rebuild its battered economy.

Top US envoy James Baker met French President Jacques Chirac in Paris, and later had talks with German Chancellor Gerhard Schroeder in Berlin.

Both France and Germany said they would work to help reduce Iraq's debt burden.

The US believes that reconstruction may be made more difficult unless much of Iraq's $120bn debts are written off.

Mr Baker is due to meet heads of government in Russia, Italy and Britain later this week.

Co-operation

"The French and the US governments want to reduce the debt burden on Iraq so that its people can enjoy freedom and prosperity," said Mr Baker after his meeting with President Chirac in Paris.

Iraqi oil pipeline blaze
Iraq's economy is shattered after the war
"It is important to reduce the Iraqi debt burden," he added.

A spokeswoman for President Chirac said they had agreed "on the importance of working together for the reconstruction of Iraq".

Later on Tuesday, Mr Baker secured Germany's backing for Iraqi debt relief from Chancellor Schroeder.

"Germany and the United States, like France, are ready not only for debt restructuring but also for substantial debt forgiveness toward Iraq," said a spokesman for Mr Schroeder.

Contract row

On Monday, the French Foreign Minister, Dominique de Villepin, had said a debt rescheduling deal could be reached through the Paris Club group of creditor nations.

Germany's position on the awarding of reconstruction contracts in Iraq was clearly expressed in the talks
Spokesman for Chancellor Schroeder
His comments were seen as significant because France chairs the Paris Club group - to which Iraq owes $40bn of its $120bn total debt.

However, Paris Club debt rescheduling has the potential to become a major political battlefield between the Bush Administration and nations that opposed the Iraq war, experts say.

Paris Club members are thought likely to stress the need for a more representative Iraqi government than the present US-appointed Governing Council, as well for as IMF-approved economic plans.

And Mr Baker's visit has been given added edge by the US decision to exclude countries - including France, Germany and Russia - who opposed the war in Iraq from bidding for $18bn of reconstruction contracts.

Mr Baker did not comment on the discussions he had with Mr Schroeder.

But the subject of the reconstruction contracts was raised during their meeting.

"Germany's position on the awarding of reconstruction contracts in Iraq was clearly expressed in the talks," Mr Schroeder's spokesman said.

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The BBC's James Ingham
"Iraq's in serious financial trouble"



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