French President Jacques Chirac has said an agreement on forgiving Iraqi debt must be reached among European countries in what was a significant breakthrough in diplomatic relations between France and the Untied States.
President George W. Bush's special envoy, Mr James Baker, met Mr Chirac today on the first leg of a European tour aimed at getting countries - particularly France, Germany, Russia and Britain - to relieve Iraq of at least some of its debt.
The International Monetary Fund puts Iraq's liabilities at about $120 billion, of which about $40 billion is debt and arrears to the 19 countries in the Paris Club - the informal group of wealthy creditor countries.
After the meeting, Mr Baker made no mention of any change to the US policy of denying countries which opposed the war in Iraq an opportunity to tender for reconstruction contracts.
But Mr Chirac's office issued a statement which said agreement was reached that a "means to reduce Iraq's debt in 2004" was needed.
"They [France and America] also agree on the importance of working together in the reconstruction of Iraq," the statement added.
Today's announcement will boost Mr Baker's cause as he moves on to diificult difficult meetings with the leaders of Germany and Russia, whose countries also opposed the war in Iraq and stand to miss out on the reconstruction contracts.
US officials have indicated that Mr Baker will keep open the possibility of France, Germany and Russia bidding for reconstruction sub-contracts.