Leaders of the Group of Seven (G7) industrial nations last night agreed to write off $71 billion (€68.4 billion) of debts owed by the world's poorest nations.
In a move they claimed would reduce the poor countries' total debt burden by one-third, the leaders meeting in Cologne agreed to increase the number of countries eligible for debt reduction from 29 to 36.
"We support faster, deeper and broader debt relief for the poorest countries that demonstrate a commitment to reform and poverty alleviation," the leaders said. But the package falls short of the demands of the anti-poverty group Jubilee 2000, which wants the rich countries to write off all debts owed by the poorest nations. More than 50,000 people are planning to form a human chain around the centre of Cologne today to demand more generosity on the part of the richer countries.
Under yesterday's deal, the G7 leaders agreed to reduce ratios of external debt to exports to 150 per cent, as opposed to the current level of 200 per cent. There was also an accord on the target for debt-to-government revenue from 280 per cent to 250 per cent.
"These combined revisions will result in deeper debt forgiveness, take greater account of debtor countries' fiscal positions and broaden the initiative to more countries," the leaders said.
But Ms Caoimhe de Barra of Trocaire, who is in Cologne to take part in today's demonstration, criticised the decision to include $20 billion of "aid-related debt" in the package.
"We welcome the reduction in the ratios but I think you need to deconstruct the figures. It is not actually as generous as it appears. We welcome it but it will not substantially change the problems developing countries face," she said.
And Ms Carole Collins, of Jubilee 2000, which brings together churches and other campaign groups, said: "Most poor countries will still pay more on debt service than on health and education.
"We urge the leaders not to think their work is done."
The British prime minister, Mr Blair, hailed the agreement as a move that was both morally right and in the long term interest of the richer nations.
"We will be writing off literally billions of dollars worth of debt. I believe this summit will mark probably the biggest step forward in debt relief," he said.
But Japan insisted that debt relief was "only half the solution to the problem" and said it must be combined with continuous and strong efforts of policy reform and structural adjustment by the debtor countries.
Mr Jacques Chirac, the French president, said it had been agreed that "those countries which have lent most [in aid-related loans] should not be penalised and those which have lent least should contribute most [to the writing off debt to multinational institutions]".
