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G7 ministers back effort to aid Iraq

Federal Reserve Chairman Alan Greenspan; Bank of Japan Governor Toshihiko Fukui and United Kingdom's Gordon Brown look on as they pose for a group portrait following the working meeting of the G7 Saturday in Washington. PHOTO: AP

The G7 industrialized nations pledged an international effort to rebuild Iraq's battered economy, with major roles for the World Bank and UN.

The group's finance ministers and central bankers, meeting in Washington, also reaffirmed their intention to pursue policies aimed at boosting global growth, with some officials saying the uncertainty brought on by the war in Iraq was fading.

The US won G7 backing for the World Bank and International Monetary Fund to begin providing technical assistance to Iraq, though the group left unsettled who will lead the rehabilitation of the US$50 billion economy. The G7 called on the UN to pass a resolution on reconstruction, signaling a desire to avoid repeating the diplomatic row that preceded the conflict.

"We began substantive discussions about how our nations and the international institutions can work together to help the Iraqi people recover, not just from 25 days of conflict, but from 25 years of economic mismanagement," US Treasury Secretary John Snow said.

The US entered the weekend demanding that the World Bank begin working on Iraq's economy as soon as possible, a campaign that met with resistance from Europe, which preferred to wait for a UN mandate.

While the ministers showed a willingness to involve the UN in Iraq, they did little to define either the world body's role or what they planned to do about Iraq's foreign debt, which may be as high as US$130 billion, according to one estimate.

France, Germany and non-G7 member Russia objected to the war and have said the UN should take a central role in reconstruction.

President George W. Bush, who failed to get Security Council backing for a war resolution on Iraq, favors a "vital" yet subordinate part for the UN with the US taking charge.

Bush and British Prime Minister Tony Blair had already agreed to seek a fresh UN resolution when they met in Belfast last week, a decision Treasury officials cited today when questioned whether the G7's stance represented a change of heart by the US.

A statement issued by the G7 didn't make clear what the UN resolution would do, saying only that "we recognize the need for a multilateral effort to help Iraq."

The meeting of officials from the US, Japan, Germany, the UK, France, Italy and Canada came three days after the US-led military coalition entered Baghdad without resistance, toppling the regime of Saddam Hussein.

Estimates on the cost of stabilizing Iraq vary. The Center for Strategic and Budgetary Assessments in Washington suggested it might cost anywhere from US$105 billion to US$498 billion over five years, depending on how many troops are needed, how much infrastructure is destroyed, and whether ethnic violence breaks out.

Calling on the IMF and World bank

The G7's call for World Bank and IMF action will likely speed a more accurate assessment.

"I am confident now after all the discussions I've had with a number of ministers and with the bank and the fund that we will have a way forward," UK. Chancellor of the Exchequer Gordon Brown said.

"First the situation must be assessed," said German Finance Minister Hans Eichel. "Afterwards we'll have to discuss how to do" the rebuilding.

For their part, the institutions said in a statement through the IMF's policy-making panel that they "stand ready to play their normal role in Iraq's development at the appropriate time."

The G7 ministers made no commitment on forgiving Iraq's foreign debt to banks and governments, estimated by the Council on Foreign Relations to range from US$60 billion to US$130 billion.

France is owed about US$1.7 billion and Germany US$4.3 billion, and they said they would rather reschedule than retire the debt.

"We won't just wipe the slate clean," French Finance Minister Francis Mer said. "We could maybe progressively renegotiate."

The policy makers agreed on the need to address the debt and sought the "early engagement" of the Paris Club, a 19-nation forum that advises countries seeking debt relief.

Even as they discussed rebuilding Iraq's economy, G7 members admitted problems remain in their own. "Growth in most of our economies has been subdued, though uncertainties have diminished," their statement said.
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