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G8 Summit Leaders Discuss Iraq Debt - 2004-06-10

The Group of Eight summit in Sea Island, Georgia Wednesday launched a Partnership for Progress in the Broader Middle East and North Africa. While the initiative says debt reduction is critical for Iraq, the summit deferred action on the Iraq debt.

While the summit leaders say debt relief is necessary they have not agreed on a formula for doing so. The Americans - to whom little money is owed - have been pressing for generous action, with creditors writing off up to 90 percent of the money owed by Saddam Hussein's government.

The French, Germans, Russians and Japanese, which hold at least $10 billion of Iraq debt, have favored less generous relief. Altogether Iraq owes creditors over $120 billion with most being owed to other Arab oil producing countries. The summit declaration commits the Group of Eight to achieving debt relief by the end of this year.

Britain's prime minister Tony Blair is hopeful that this week's United Nations endorsement of Iraq's provisional government will make it easier to resolve contentious issues like debt.

"What we're really saying is whatever the divisions of the past, whatever the differences in the past, let us unite now in a different vision for a modern Iraq capable of being that force for good for Iraqis, for the wider region and the world," said Mr. Blair.

It was accepted that it would be difficult to reach agreement on the Iraqi debt. Speaking in Washington in advance of the summit, Council of Foreign Relations economic specialist Gene Sperling, said Iraq's creditors hope to exchange debt relief for reconstruction contracts.

"I think we all know that there is an under tone to reconstruction contracts," Mr. Sperling said. "And you know that in a lot of countries you're going to hear we're not going to give debt relief so there will be more funds for construction contracts that are not in one's own country."

Thus far Germany, France, and Russia have not been received any of the multi-billion dollar contracts to rebuild Iraq's shattered or neglected infrastructure.