Germany pledged Monday to step up economic assistance to Syria as visiting Chancellor Gerhard Schroeder acknowledged differences between the two countries on the Arab-Israeli peace process.
Schroeder announced a loan of 62 million marks (27 million dollars, 32 million Euros) for Syrian hydraulic projects and an end to German opposition to assistance for Damascus.
Germany had suspended financial cooperation with Syria about 10 years ago, when Syria stopped paying the reunified Germany for debts it incurred with the former East Germany.
"Once the agreement we reached on the debt is signed, we will begin to cooperate," Schroeder said after a meeting with Syrian President Bashar al-Assad.
Schroeder, on a long-planned tour of the Middle East, said that he agreed with Assad that "lasting peace must be installed in the region, even if there were differences on how to reach that."
The chancellor expressed support for application of the Sharm el-Sheikh agreement, an informal ceasefire pact reached last week in Egypt between Israel and the Palestinians after mediation by US President Bill Clinton.
"A return to negotiation (between Israel and the Palestinians) is possible only if the violence abates," Schroeder said.
The chancellor said he also asked Syria "to continue its stabilizing role in south Lebanon and support all who want stability in this region."
Israel has accused Syria, the main powerbroker in Lebanon, of giving the Shiite militant movement Hizbollah the green light to capture three Israeli soldiers earlier this month.
Germany has been widely reported to be a potential mediator to win the release of the captives.
Schroeder was due to leave Tuesday for Israel and the Palestinian territories. He already visited Lebanon, Jordan and Egypt.
In Damascus, Schroeder announced that Germany would no longer object to assistance to Syria by the European Investment Bank, which had agreed to give the country 75 million Euros for electricity works.
"We are at the dawn of new relations of cooperation," Schroeder said.
Prime Minister Mohammed Mustapha Miro, who also met with the chancellor, expressed satisfaction with the agreement.
"We found that Schroeder shares our desire to enlarge our economic, commercial, technical and cultural cooperation," he said.
Syria owes Germany about 1.25 billion Euros.
A European diplomatic source told AFP on Thursday a preliminary accord had been negotiated for the debt to be repaid over 20 years, starting with a grace period of five years during which interest will not be charged.
The outlines of the accord were reached during talks early this month in Damascus between government officials and visiting German Deputy Finance Minister Caio Koch-Weser, the source said.
Most of the Syrian debt was incurred to the former East Germany for economic and especially industrial imports, he added.
During the talks earlier this month, Damascus claimed it had not received some of the imports it ordered from the former East Germany, the European source said.
Syrian exports to Germany totaled 760 million in 1999, while German exports to Syria hit 280 million, according to the German embassy.
Germany is the second largest exporter to Syria after Italy, and most of its sales are in machines, industrial materials, chemical products, cars and stainless steel.
Petroleum products make up most of the Syrian exports to Germany, which in turn buys Syria's cotton and textile products – DAMASCUS (AFP)
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