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