Cablegate: More From Austria On International Compact With

VZCZCXRO2557
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHVI #3522 3461035
ZNR UUUUU ZZH
R 121035Z DEC 06
FM AMEMBASSY VIENNA
TO RUEHC/SECSTATE WASHDC 5760
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHGB/AMEMBASSY BAGHDAD 0099

UNCLAS VIENNA 003522

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON EFIN IZ AU
SUBJECT: MORE FROM AUSTRIA ON INTERNATIONAL COMPACT WITH
IRAQ --DEBT RELIEF

REF: A) VIENNA 3248 B) STATE 181094

1. (SBU) On December 7, post followed up discussions with
the Austrian MFA (ref A) to discuss the possibility of
Austria forgiving the remaining 20 percent of its Iraqi debt.
Thomas Wieser, Director General of Economic Policy and
Financial Markets in the Ministry of Finance (U/S-level),
told A/DCM and EconUnit Chief that Austria had agreed to
cancel 80 percent of outstanding Iraqi debt, which
represented almost one percent of Austria's GDP, for two
reasons. First, it was the right thing to do. Second, the
debt write-off counted as official development assistance,
which the GoA hopes to increase, given its below-average
ranking amongst EU Member States.

2. (SBU) According to Wieser, there are two factors at the
moment that make it difficult for Austria to go any further
on Iraqi debt forgiveness. The future earnings potential of
Iraq is significantly greater than that of least developed
countries. Second, because the GoA budget is based on
national accounts and not on cash flow, any debt forgiveness
would have an impact on the deficit, necessitating a revenue
increase or an expenditure cut during delicate negotiations
to form a new government. Wieser added that, should a more
encompassing Iraqi debt forgiveness package emerge within the
Paris Club context, Austria would definitely re-evaluate its
position.
MCCAW

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