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Peres Reports to Cabinet: U.S. Offers Israel Moratorium on $500 Million Debt Due in Next Three Month

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Premier Shimon Peres confirmed to the Cabinet today that the U.S. government has suggested a moratorium on the payment by Israel of $500 million in debts which fall due over the next three months.

Peres explained that the idea — advanced to him, he stressed, by Administration and Congressional leaders — is that before the three months elapse Congress will vote additional aid for Israel of at least the $500 million, and possibly more, thereby effectively cancelling the debts.

Initial reports of this bither to secret, but crucially important, concession were broadcast by Israel Radio’s Washington correspondent this morning.

ASSURANCES GIVEN BY U.S. LEADERS

Peres told the ministers at a special Cabinet session convened to discuss his trip last week to the U.S., that he and Deputy Premier Yitzhak Shamir had initially balked at the idea of debt-deferment, given the distasteful aura surrounding the idea.

But top American leaders had assured him that in all that touched upon Israel’s credit worthiness on the money markets America’s own public expressions of confidence, such as that by President Reagan at the White House last week, would secure required loans for Israel. There was no pretending to the outside world, the American leaders stressed, that Israel did not face an immediate economic crisis.

The $500 million, coupled with Washington’s agreement to pay the entire $1.2 billion in economic aid for fiscal 1985 immediately means that Israel’s dwindling coffers are to be replenished forthwith to the substantial tune of $1.7 billion.

Peres stressed, however, that this transient relief does not in any way relieve Israel of the need to attend to its crushing economic crisis — especially the raging inflation.

Since his return from the U.S. yesterday, Peres has laid primary emphasis on the urgent need to reach a wage-price “package deal” involving all sectors of the economy.

AMERICANS UNDERSTAND ISRAEL’S DILEMMA

In his report to the Cabinet, Peres emphasized the Administration’s solid acceptance of his contention that Israel’s fundamental problem was the dilemma between its defense needs and its economic challenges. Israeli aides quoted Peres as saying in Washington, to top U.S. leaders: “If you had an Israel in Southeast Asia, or in Central America, you would look different there.”His inference — and it was entirely endorsed by Reagan and Secretary of State George Shultz, according to the aides — was that Israel’s defensive capability was a strategic boon to the West, and at the same time was the root-cause of Israel’s present economic predicament.

The aides said Peres did not conceal his reservations over economic policy during the Likud years. But he stressed that a modicum of consumer relaxation was understandable after the decades of strain and hardship. In the end, the bulk of Israel’s effort still went to defense, not luxuries.

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