Behind the Headlines: Israel Trying to Counter Charges It Won’t Be Able to Repay Loans

Israel is seeking to deflect charges in the United States that it will not be able to pay back the $10 billion in loans Washington has been asked to guarantee.

Critics have been warning that could mean U.S. taxpayers would get stuck with the bill for the interest and principal on the loans, which Israel needs to help absorb Soviet and Ethiopian immigrants.

But these critics overlook the contributions to the growth of the Israeli economy from the wave of Soviet immigrants, expected to total nearly a million within five years, says Amnon Neubach, economics minister at the Israeli Embassy here.

At an embassy briefing Tuesday, Neubach explained that the huge immigration, coupled with investment in commerce and industry, is expected to stimulate an 8 percent annual growth in Israel’s economy.

This includes an expected growth in the gross national product from $51 billion in 1990 to between $75 billion and $80 billion in 1995-96 and an expected 9 to 10 percent annual increase in exports for the next five years.

In addition, the economics minister stressed Israel’s flawless record in paying back its debts.

Neubach said he did not know whether numerous negative articles about the Israeli economy in the last two weeks were orchestrated by some in the White House and Congress, as Israeli newspapers have charged.

The articles began appearing after President Bush threatened he would veto any legislation authorizing the loan guarantees, in defiance of his request for a 120-day delay in action on the bill.

To avoid a clash with the president, the legislation was introduced in the Senate with 70 co-sponsors, but action was delayed until January.

Neubach said he preferred to believe the articles were due to a “misconception” by American reporters who do not understand that Israel’s is a small economy, not like those of the United States or the nations of Western Europe.

‘WE ARE A FREE-MARKET ECONOMY’

He particularly rejected the view in some of the articles that Israel is incapable of making needed changes in its economy.

He pointed out that since 1985, Israel has been making such economic reforms as privatization of government-owned companies and loosening government control over foreign exchange and the capital market. It also has eliminated all subsidies except for transportation and water.

“We are a free-market economy,” he maintained.

On the use of the loans itself, Neubach said the money will be used to finance housing mortgages for the Soviet immigrants, create jobs for the newcomers and provide infrastructure for new residential and industrial developments.

Neubach was most confident about the housing situation. He pointed out that a year ago, there were charges that Israel was unprepared to house the immigrants, which now have totaled 350,000. Today, he said, there is a surplus of immigrant housing.

Of the $400,000 in U.S.-guaranteed loans Israel received earlier this year, $200,000 has already been spent in the United States to buy prefab and mobile homes and materials for housing, he said.

Neubach said providing jobs for the immigrants will be harder, since some 350,000 new jobs must be created in the next five years, of which only some 50,000 will be with the government.

He said the government will help the private sector create the bulk of the jobs by making it easier for commercial banks to finance investment in capital goods, machinery and equipment, and by building highways, roads, sewage and water installations to new industrial parks.

Ruth Yaron, the embassy spokeswoman here, said that for Israel, absorption is not a question of money.

“We will absorb as many Jews as want to come from wherever they come,” she said. “The question is whether their absorption will be successful in the long run.”