US special envoy James Baker at the Elysee Palace in Paris. (AFP)

Berlin/Paris, Dec. 16 (Reuters): A German government spokesman said today that Germany, France and the US agreed they were prepared to offer substantial debt relief to Iraq to aid the country’s reconstruction.

“Germany and the US agree that a solution to the debt question is essential for the reconstruction of Iraq,” government spokesman Bela Anda said in a statement following talks between Chancellor Gerhard Schroeder and US special envoy James Baker.

“Germany and the US are — like France — ready not only to restructure the debt but also to engage in substantial debt forgiveness,” Anda said, adding that details should be discussed in the Paris Club of creditor nations.

A second German government spokesman said Germany and the US would remain in talks regarding Washington’s decision to bar countries such as France, Germany and Russia that opposed the US-led invasion of Iraq from bidding for reconstruction contracts worth about $18.6 billion.

Baker and Chirac presented a picture of unity at the start of a European trip on which Baker hopes to sound out support for a debt relief deal for Iraq and ease a transatlantic row over contracts to rebuild Iraq.

“The French and the US government want to reduce the debt burden on Iraq so that its people can enjoy freedom and prosperity,” Baker said after meeting Chirac. “It is important to reduce the Iraqi debt burden within the Paris Club (of creditor states) in 2004 if possible,” he said. The IMF puts Iraq’s debts at about $120 billion, of which about $40 billion is debt and arrears to the 19 countries in the Paris Club. France is one of the largest creditors to Iraq from the Paris Club.

“(Baker and Chirac) agree on (the need for) finding the means to reduce Iraq’s debt in 2004 in the Paris Club, in accordance with the appropriate conditions,” an official at Chirac’s office said.

“They also agree on the importance of working together in the reconstruction of Iraq,” the official added. France had signalled yesterday that it was keen to carve out a role in aiding Iraq, saying the Paris Club could reach a debt relief deal in 2004 and that France itself was ready to write off some of Iraq's debts.