US embassy cable - 05VIENNA1028

UNCLAS VIENNA 001028 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON, EFIN, EAID, AU, IZ 
SUBJECT: GOA VIEWS ON DEBT RELIEF FOR HIPCS AND IRAQ, 
WOLFOWITZ NOMINATION 
 
REF: STATE 31823 
 
1.  (U) Econ/Pol Counselor and Econ Unit Chief met with 
Michael Linhart, Director of the Austrian Development Agency, 
on March 10 to discuss reftel points and background paper. 
Econ Unit Chief followed up on March 25 with Thomas Wieser, 
Director General in the MoF's Economic Policy and Financial 
Markets Directorate. 
 
 
No Support for IFF/GoA Supports 100% Debt Relief for HIPCs 
--------------------------------------------- ------------- 
2.  (SBU) Wieser stated the GoA would not support the 
creation of an International Finance Facility (IFF).  Austria 
opposed an IFF based on philosophical grounds.  An IFF, in 
Wieser's opinion, was a " political trick" that would 
inevitably lead to a drop in development assistance for 
Heavily Indebted Poor Countries (HIPCs).  The GoA believed 
donors could and should do more on a bilateral basis to 
alleviate debt burdens.  Wieser added the GoA does support 
the USG proposal of up to 100% debt relief for HIPCs. 
 
 
Transport Taxes for Development Assistance 
------------------------------------------ 
3.  (SBU) Wieser added that the GoA would support additional 
transport taxes -- either a fuel tax or a surcharge on 
tickets -- as a means to increase official development 
assistance (ODA).  The GoA believes that half of the revenue 
from an EU-wide fuel tax should go towards ODA, while the 
other half should go to the EU budget "to alleviate the 
position of net contributors."  A tax on tickets, in Wieser's 
opinion, would only marginally raise prices.  Austria would 
support such a tax on a purely internal EU basis, if no 
international consensus exists.  Wieser noted that either tax 
faced an uphill battle within the EU because Member States 
"on the periphery," i.e., Malta, Cyprus, Greece, and Finland 
vehemently opposed these proposals. 
 
 
GoA Welcomes Wolfowitz Nomination 
--------------------------------- 
4.  (SBU) Wieser said the GoA agreed with the USG's view that 
debt relief for the HIPCs should have a good governance 
component.  Wieser praised the work of outgoing World Bank 
President Wolfensohn, especially his efforts to highlight 
corruption as a serious impediment to growth.  Wieser 
expressed confidence that Paul Wolfowitz would continue these 
efforts.  Wieser added that Finance Minister Grasser had 
publicly welcomed Wolfowitz' nomination. 
 
 
Iraq Debt Relief 
---------------- 
5.  (SBU) Wieser commented that the GoA was willing to 
provide up to 80% debt relief to Iraq.  Wieser noted the GoA 
could not support further relief, because Iraq's bilateral 
debt to Austria was a "heavy burden," representing 
approximately 1% of Austria's GDP.  (Note: The MoF told us in 
January that the Iraq principal debt is USD 813 million, and 
total debt (interest and principal) is USD 1.8 billion.  End 
Note.) 
 
6.  (U) Baghdad minimize considered. 
Brown