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Cablegate: Goa Views On Debt Relief for Hipcs and Iraq,

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS VIENNA 001028

SIPDIS

SENSITIVE

E.O. 12958: N/A
TAGS: ECON EFIN EAID AU IZ
SUBJECT: GOA VIEWS ON DEBT RELIEF FOR HIPCS AND IRAQ,
WOLFOWITZ NOMINATION

REF: STATE 31823

1. (U) Econ/Pol Counselor and Econ Unit Chief met with
Michael Linhart, Director of the Austrian Development Agency,
on March 10 to discuss reftel points and background paper.
Econ Unit Chief followed up on March 25 with Thomas Wieser,
Director General in the MoF's Economic Policy and Financial
Markets Directorate.


No Support for IFF/GoA Supports 100% Debt Relief for HIPCs
--------------------------------------------- -------------
2. (SBU) Wieser stated the GoA would not support the
creation of an International Finance Facility (IFF). Austria
opposed an IFF based on philosophical grounds. An IFF, in
Wieser's opinion, was a " political trick" that would
inevitably lead to a drop in development assistance for
Heavily Indebted Poor Countries (HIPCs). The GoA believed
donors could and should do more on a bilateral basis to
alleviate debt burdens. Wieser added the GoA does support
the USG proposal of up to 100% debt relief for HIPCs.


Transport Taxes for Development Assistance
------------------------------------------
3. (SBU) Wieser added that the GoA would support additional
transport taxes -- either a fuel tax or a surcharge on
tickets -- as a means to increase official development
assistance (ODA). The GoA believes that half of the revenue
from an EU-wide fuel tax should go towards ODA, while the
other half should go to the EU budget "to alleviate the
position of net contributors." A tax on tickets, in Wieser's
opinion, would only marginally raise prices. Austria would
support such a tax on a purely internal EU basis, if no
international consensus exists. Wieser noted that either tax
faced an uphill battle within the EU because Member States
"on the periphery," i.e., Malta, Cyprus, Greece, and Finland
vehemently opposed these proposals.


GoA Welcomes Wolfowitz Nomination
---------------------------------
4. (SBU) Wieser said the GoA agreed with the USG's view that
debt relief for the HIPCs should have a good governance
component. Wieser praised the work of outgoing World Bank
President Wolfensohn, especially his efforts to highlight
corruption as a serious impediment to growth. Wieser
expressed confidence that Paul Wolfowitz would continue these
efforts. Wieser added that Finance Minister Grasser had
publicly welcomed Wolfowitz' nomination.


Iraq Debt Relief
----------------
5. (SBU) Wieser commented that the GoA was willing to
provide up to 80% debt relief to Iraq. Wieser noted the GoA
could not support further relief, because Iraq's bilateral
debt to Austria was a "heavy burden," representing
approximately 1% of Austria's GDP. (Note: The MoF told us in
January that the Iraq principal debt is USD 813 million, and
total debt (interest and principal) is USD 1.8 billion. End
Note.)

6. (U) Baghdad minimize considered.
Brown

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