WASHINGTON, 13 April 2003 — Group of Seven powers, trying to patch up deep differences over Iraq, promised yesterday to work together to rebuild the war-scarred country with a new UN Security Council resolution.
But disagreements lingered, particularly over how to cope with Iraq’s heavy debt burden. The G-7 also agreed to cooperate to boost sluggish world growth.
“We recognize the need for a multilateral effort to help Iraq,” finance ministers and central bankers of Britain, Canada, France, Germany, Italy, Japan and the United States said in a joint statement. “We support a further UN Security Council resolution,” said the policymakers, wrapping up heavily-secured, three-hour meeting ahead of weekend global financial talks here.
They offered no specifics on the UN resolution or any details on the postwar administration of Iraq, a source of friction between the United States and its allies.
Iraq’s debts, amounting to up to $127 billion, must be handled by the Paris Club of sovereign debtors, the G-7 said. Total Iraqi liabilities, including Gulf War claims, may exceed $380 billion.
Fissures remained after the talks at Blair House, near the White House, over Washington’s informal push for debt forgiveness for a new Baghdad administration. “We had useful discussions about how to proceed with the Iraqi debt, recognizing that the Iraqi people cannot bear the burden of current debt levels,” US Treasury Secretary John Snow said.
Germany and France appeared unconvinced about the need to wipe the Iraqi slate clean. “We do not only expect to get our money, we will get our money back,” German Finance Minister Hans Eichel said. Germany estimates it is owed $4.3 billion.
French Finance Minister Francis Mer separately said Iraq was not alone in needing debt relief. “Certainly, Iraq needs our attention, but so does Niger... Let’s not forget that there are a lot of other countries,” Mer said. The ministers seemed, for the first time, to be trying to bridge a gulf over the war in Iraq, which was hotly opposed by G-7 members France and Germany, and how to manage the aftermath.
“We met today at a time in which the world economy faces many challenges. In this light, we reaffirm our commitment to multilateral cooperation,” the statement said.
European Central Bank President Wim Duisenberg said the atmosphere was cordial, with earlier rancor put aside. “None of the bitterness appeared or surfaced,” he said. The ministers and bankers said they would work to ramp up economic growth. “Each country must decisively in its own way,” Snow said. “Growth in most of our economies has been subdued, though uncertainties have diminished,” the G-7 statement said. “A strong and lasting recovery is essential for our own countries and for the world. To this end, we each commit to pursue sound macroeconomic polices that support sustained growth.”
Even after the Iraq war, the economy faces menaces from terrorism, the costs of protecting trade, housing bubbles and the hangover from the late-1990s technology-driven stock market, finance officials say.
The International Monetary Fund forecast this week that the world economy would grow by 3.2 percent this year, barely up from 3.0 percent last year, before a rebound to 4.1 percent growth in 2004.
“Nobody can estimate today with any precision the lasting costs of the war in Iraq. But so far, the risks of the war for the global economy have remained contained,” IMF Managing Director Horst Koehler said.
G-7 ministers said there was a potential for higher growth through economic reforms, improved productivity, and by bolstering investors’ confidence with cleaner company management, market discipline, and openness. “We will continue to exchange markets closely and cooperate as appropriate,” the G-7 statement said.
It also underscored the importance to world growth of toppling trade barriers in the World Trade Organization negotiations. Those talks appear to be slipping, especially in agricultural trade.
The G-7 meeting preceded weekend talks by ministers of the 184-nation IMF and World Bank.
