Modai Reaches ‘understanding’ with U.S. on Economic Aid for Israel, but Provides No Specific Amounts

Israeli Finance Minister Yitzhak Modai appears to have reached an understanding with the Reagan Administration for the level of economic aid to be requested for Israel from Congress and on the direction of Israel’s economic reform. But he said at a press conference here Friday that he had agreed “not to publicize any figures or any methods.”

The Minister, whose visit to Washington last week coincided with the opening of Congressional subcommittee-level hearings on an aid package to Israel, told reporters, “All I can say is that we did come to an understanding on the objective itself.” He added that specifics would “be worked out between the parties as we go along.” His remarks came after a second meeting with Secretary of State George Shultz.

Although the Reagan Administration has submitted to Congress its foreign aid package for fiscal year 1986, it has omitted a figure for economic aid to Israel and abstained from any recommendation on meeting Israel’s request for an additional $1.5 billion in emergency financing over two years.

U.S. WANTS MORE REFORMS

It maintains that Israel must adopt further measures to form its economy before additional American aid could be effective. The package, however, does include a request for $1.8 billion in military aid, representing a $400 million increase over the amount approved for fiscal year 1985. Israel had requested a total of $4.05 billion for 1986.

Referring to his agreement with the Administration not to publicize details of their discussions last week, Modai declined to say whether he had re ceived assurances that a figure for economic aid would be submitted following next week’s scheduled visit to Washington by Egyptian President Hosni Mubarak.

Asked at one point about the level of aid agreed on and the timing of its submission to Congress, he said “I cannot answer by figure but by a word I can answer, and that is ‘soon.'” But subsequently he said no specific figure has been provided to him by the Administration.

The U.S. and Israel had earlier appeared to be at an impasse over what further economic reform measures Israel should adopt before the Administration could present Congress with a specific aid request. Last Wednesday, Under Secretary of State Allen Wallis said in his testimony before the House Foreign Affairs Committee’s subcommittee on Europe and the Middle East, that Israel had not done enough to correct its economic imbalances and that continued high budget deficits, adverse balance of payments, high inflation and declining productivity reflected those imbalances.

ISRAEL TO CONTROL GOVERNMENT SPENDING

But Modai said Friday that Israel recently took “an important measure” when a bill prohibiting government spending beyond levels specified in the budget passed a first reading in the Knesset. Reagan Administration officials, he said, had been unaware of this when Wallis testified. The bill labels government overspending an “administrative offense.” It must pass another two readings by the Knesset plenary before receiving full approval.

The day after Wallis testified in Congress, Shultz spoke at hearings of the Senate Appropriations Committee’s Subcommittee on Foreign Operations, where he compared Israel’s efforts to control its economic crisis to “clamping a lid on a boiling pot,” rather than turning down the heat below it.

Modai said he had told the Secretary of State “that since I was a kid I was taught by mommy that when you come across a boiling pot and it boils in your face, the first thing you should do is put on the lid and then start cooling off whatever is in the pot.” This, he maintained, has been Israel’s approach to its economy. “Now,” he said, “we are at the stage that we’ve quenched the fire and we have started cooling it.”