WASHINGTON - The US has asked Japan and European nations to forgive some of Egypt's debt to support a country seen as holding the key to democratization and stability in the Arab world, The Nikkei reported Saturday. Letters co-signed by Treasury Secretary Timothy Geithner and Secretary of State Hillary Clinton were sent by the end of last month to the Group of Eight nations, as well as Scandinavian countries that have loan claims against Egypt, according to sources. The US government sees debt waivers as key to assisting Egypt, whose ability to meet its foreign debt obligations has eroded significantly in light of political turmoil. It is urging Egypt to finance employment measures and infrastructure investment with the money saved. Egypt's foreign debt, including private-sector loans, totaled 33.7 billion dollars, or roughly 2.7 trillion yen, as of June 30, 2010, according to the nation's central bank. The amount owed to Japan was 4 billion dollars, more than any other country. Yen-denominated foreign aid to Egypt totaled about 300 billion yen as of March 31, 2010, according to Japan's Finance Ministry. In the letters, the US did not suggest specific amounts for debt waivers by each nation, but it apparently encouraged Japan and European nations to take steps similar to its own. The US has so far decided on a rescue package of up to 2 billion dollars for Egypt, including debt forgiveness and new loans and investment. However, Japan and Europe are reluctant to waive debt, in part because of the huge cost burden. Debt forgiveness would also make fresh lending by governments and banks difficult. As an alternative, Japan will likely consider extending long-term, low-interest yen loans on its own and providing new loans through international organizations such as the World Bank. Since the collapse of the government led by former President Hosni Mubarak, Egypt has shown signs of reversing its pro-American, pro-Israel stance. This has given the US a greater impetus to come to Egypt's aid. In addition to helping budding democracy in the Middle East and North Africa, it wants to ensure that the country remains friendly toward the US. In addition, it may be trying to counter China, which has strengthened its presence in the region using its financial muscle.
