PARIS, Dec 16: France and the United States agreed on Tuesday that Iraq’s crushing national debt had to be reduced to aid reconstruction efforts, amid signs that a thaw is finally happening in Paris-Washington relations.

The conciliatory note was struck during a meeting between French President Jacques Chirac and a US envoy, James Baker, who has embarked on a European tour to urge countries to forgive Iraq’s estimated 120-billion-dollar debt.

Baker, a former US secretary of state close to US President George W. Bush, said the debt-alleviation would be worked out within the Paris Club of 19 creditor nations.

“I think that we all agreed that it is important to reduce this debt within the Paris Club if at all possible in the year 2004 and I think that we basically have agreement on the parameters of that stake,” Baker told journalists after seeing the French president.

“We want to do what we can to reduce the oppressive debt burden on the Iraqi people so they can enjoy freedom and prosperity,” he said, adding that Chirac had been “extraordinarily warm and friendly” during the talks.

Chirac’s spokeswoman, Catherine Colonna, at his side confirmed the agreement and said: “We are also in agreement on the importance of working together for the reconstruction of Iraq.”

French officials stressed, however, that the Paris Club can only change debt terms with internationally recognised governments.

Iraq does not have such an administration yet, but the occupying US forces have said an independent Iraqi government should be formed by July 1, 2004.

Of the 120 billion dollars (97 billion euros) Iraq owes, 40 billion is due to the Paris Club and 80 billion is owed to other countries, most of them Arab.

Within the Paris Club, Japan is the biggest creditor, owed 4.1 billion dollars, followed by Russia, owed 3.5 billion, France, three billion, Germany, 2.4 billion, the United States 2.2 billion and Italy, 1.7 billion.

Overdue interest payments almost double those sums in some cases.

France’s diplomatic turn-around came after the weekend capture of deposed Iraqi president Saddam Hussein, which handed the United States a rare symbolic victory.

French Foreign Minister Dominique de Villepin — one of Washington’s sharpest critics — said on Monday that, if a Paris Club agreement was reached, “France could then envisage debt cancellations that are appropriate and compatible with Iraq’s financing capability.”

On Tuesday, de Villepin said “the international community must rally around the United Nations” and added: “France will fulfil its role in that effort.”—AFP