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Cablegate: No German Plans for Further Iraqi Debt Relief

VZCZCXRO5003
OO RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK
DE RUEHRL #3281 3131757
ZNR UUUUU ZZH
O 091757Z NOV 06
FM AMEMBASSY BERLIN
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6057
INFO RUCNRAQ/IRAQ COLLECTIVE

UNCLAS BERLIN 003281

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON EFIN IZ GM
SUBJECT: NO GERMAN PLANS FOR FURTHER IRAQI DEBT RELIEF

REF: STATE 181094

1. (SBU) Johannes Kindler, Deputy Director General of the
Federal Chancellery, and Rolf Wenzel, Deputy Director General
for International Financial and Monetary Policies of the
Ministry of Finance, told Embassy officers in separate
meetings that Germany was unlikely to forgive further Iraqi
debt beyond its Paris Club commitment.

2. (SBU) Kindler highlighted the legal and political
difficulties of such a move. He noted that the Germany's
political decision to commit to the Paris Club terms of 80
percent debt relief was extraordinary, given that Iraq was
not a lesser developed country and the debt was commercial
instead of development assistance.

3. (SBU) Wenzel suggested that relief from the remaining 20
percent of debt would provide little additional benefit to
Iraq, since payments on interest are slated to begin only in
2009 and on principal in 2011. Debt forgiveness would
therefore not "put additional money on the table" for Iraq to
use in development and capacity building. Wenzel rejected
the argument that debt relief would encourage private
investment, noting that Iraq's problem was security, not lack
of finance. A recent IMF report on Iraqi was positive about
its finances and made no mention of the need for more debt
relief.

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4. (SBU) According to Wenzel, the German Finance Ministry
approached the Iraqi Ministry of Finance in September with an
offer of technical assistance that might focus on, for
example, how best to privatize former state-owned companies.
They offered to bring Iraqi officials to a workshop in
Germany assess their needs. To date, the Iraqis have not
responded.
BAUMAN

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