Bush calls for 90% write-off of Iraqi debt

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George Bush is to press Iraq's creditors to write off as much as 90 per cent of its $42bn (£23bn) sovereign debt at this week's G8 summit in Sea Island, Georgia.

George Bush is to press Iraq's creditors to write off as much as 90 per cent of its $42bn (£23bn) sovereign debt at this week's G8 summit in Sea Island, Georgia.

The move is unlikely to find much favour with France and Russia, the two biggest creditors, which have been arguing for a more modest cut of between 50 per cent and 65 per cent.

The US President believes Iraq's debt should be generously forgiven because it was run up by Saddam Hussein's regime. Almost all of the borrowings were incurred before the first Gulf war began in 1990, half of the total is unpaid interest and many lenders had given up hope of ever seeing their money again.

"We know the American position, which is to wipe out as much as is possible of Iraq's debt," French finance minister Nicolas Sarkozy said recently. "We agree completely with making an effort - a substantial effort. The percentage will be decided by the heads of state."

France is understood to be owed $6bn while the other large creditors - Russia, Japan and Germany -, are said to be owed almost $15bn.

Iraq has total external debts of around $120bn. Much of this is owed to commercial banks and trade creditors, many in the Middle East.

Some has been bought by speculators hoping to make a turn when a deal is struck. They have been paying between 8¢ and 30¢ per dollar of Iraqi debt.

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