Finance Minister Stuns Colleagues by Suggesting Israel Forgo U.S. Aid

Finance Minister Yitzhak Moda’i has stunned government colleagues by suggesting that Israel would be prepared to give up the $1.2 billion in economic aid it receives each year from the United States in exchange for the $10 billion in U.S.-guaranteed loans it is seeking over the next five years for resettlement of Soviet immigrants.

Moda’i was quoted by the Washington Post on Tuesday as saying Israel could live without the economic assistance if the U.S. government underwrote the loans, enabling it to borrow the $10 billion at low interest rates from commercial banks.

He proposed that at the end of the five-year loan period, the U.S. aid package could be reduced by a third, or $400 million, each year for three years, after which point Israel would receive no further economic aid.

Moda’i said nothing about the $1.8 billion in military aid Israel gets from the United States each year, also in the form of a grant.

“The suggestion seems to be too generous,” said Amos Rubin, economic adviser to Prime Minister Yitzhak Shamir.

Senior Treasury officials said it was too early to consider foregoing U.S. economic aid, given the delicate state of the Israeli economy. In any event, Moda’i did not coordinate his statement with them, they said.

But at least one respected economist thought Moda’i’s suggestion was “not a bad idea.”

Gideon Eshet, writing in Yediot Achronot, observed that the annual American aid services Israel’s debts for security assistance received in the past.

Inasmuch as payments on those debts will decrease by the end of the decade and since the Americans are likely to reduce assistance anyway, “why not look good now and announce we can do without it?” Eshet wrote.

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