Reagan Administration Continues to Demand More Economic Reforms from Israel Before Aid Increase

After meeting with Israeli Finance Minister Yitzhak Moda yesterday, Secretary of State George Shultz reiterated today the Reagan Administration’s position against recommending economic aid to Israel until it adopts further substantive economic reforms.

Modai reportedly told Shultz at their meeting that Israel faced political constraints and had done all it could to reform its economy by introducing budget cuts and instituting other austerity measures. But Shultz has requested another meeting with the Finance Minister this afternoon. An Israel Embassy official said he expected this meeting would be an important one.

Meanwhile, the Secretary of State, in his testimony before the Senate Appropriations Committee’s Subcommittee on Foreign Operations, said the Administration intends to hold back on recommending a specific level of economic aid “pending further discussion with Israel and further evolution of its stabilization program.” The Administration, Shultz said, had indicated its “willingness to provide extraordinary assistance in support of a comprehensive Israeli economic program that deals effectively with the fundamental imbalances in the Israeli economy.”

Without such a program, “additional U.S. assistance would not resolve Israel’s economic problems but merely help perpetuate them, “he said.

MORE MILITARY AID RECOMMENDED

The Administration has recommended that Congress approve $1.8 billion in military aid for Israel, an increase of $400 million over the amounts requested and received from Congress last year. But the Administration has held back on submitting a figure for economic aid for the fiscal year 1986 budget. Israel has requested $4.05 billion in aid altogether, as well as an additional $800 million in emergency financing to be tacked on the budget for fiscal year 1985.

All in all, it has requested emergency aid of $1.5 billion that would extend over a period of two years. All of the Israeli aid is a grant.

Modai is to meet this afternoon with members of the House Foreign Affairs Committee’s Subcommittee on Europe and the Middle East. The committee is expected to begin consideration of the annual foreign aid bill in two weeks and the Administration has said it hopes to submit precise figures for requested economic aid to Israel before then.

MUBARAK ASKS MORE FUNDS

The Congressional subcommittee hearings of yesterday and today took place less than a week before President Hosni Mubarak of Egypt arrives in Washington with his own foreign aid requests. The Egyptian President has asked for a $1 billion economic aid package for the 1985 fiscal year.

In his testimony today, Shultz referred only to the Administration’s recommendation for an increase in Egyptian military aid. He also maintained that the military aid level requested for Israel would help it keep its “qualitative edge over potential adversaries in the region.”