German Chancellor Gerhard Schreoder said Tuesday Germany is willing to reach a deal to ease Iraq's debt.

The chancellor said Germany was ready to make a "substantial contribution"to rebuilding Iraq.

"Germany is ready to make a substantial contribution to help rebuilding a democratic and stable Iraq.That will be a subject of our talks today and I think that we will have an agreement within a foreseeable time,"Schroeder said.

He met with US special envoy James Baker in Berlin on Tuesday to discuss the issue of reducing Iraq's foreign debt.

The former US Secretary of State is on a European tour to gain support for relieving Iraq's foreign debt and ease a transatlanticrow over the awarding of reconstruction contracts in Iraq.

German government spokesman Bela Anda told reporters that "Germany and the United States are ready not only to restructure the debt but also to engage in substantial debt forgiveness."

Germany is owed close to 5billion US dollars,while Iraq's total debts are estimated by the International Monetary Fund to bearound 120billion dollars.