U.S. Loan Guarantees Greeted with Mixed Reviews in Israel

Israeli officials sighed with relief this week when President Bush announced his support for billions of dollars worth of long-awaited loan guarantees.

But in other quarters, the reaction was more mixed.

Some economists expressed concern that the funds would actually hurt the economy; the Palestinians could not decide whether the deal was good for the Arabs; and the opposition Likud charged that unnecessary concessions were made in exchange for the guarantees.

Economic skeptics such as David Boaz, former head of the budget division at the Treasury, said guarantees were important only in the context of a projected 1 million immigrants over the next five years.

But with the sharp decline in aliyah, they argue, the money may end up being spent on consumption rather than infrastructure, refueling the inflation that has been relatively dormant in the past few years and creating an unbearable deficit once the loans are paid back.

But newly appointed Finance Minister Shohat displayed obvious relief. “The loan guarantees are an umbrella if we run low on foreign currency reserves; they will help us mobilize money at low interest; and they will help develop the economic infrastructure, thereby creating new job opportunities,” he said.

Shohat pledged that the money would not be used to cover running deficits.

HOPE FOR A BOOST IN ALIYAH

The government has yet to decide whether it will use the loans to invest directly in the infrastructure or sell the dollars to private business, thus encouraging the private sector to push the economy into growth.

Simcha Dinitz, chairman of the Jewish Agency and World Zionist Organization, expressed the hope Wednesday that the loan guarantees would boost aliyah.

He said the priority given by the new government to the creation of job opportunities might bring about renewed immigration from the former Soviet Union as Jews there wait to see whether Israel can offer them a chance to work.

“The opportunity to bring over millions of Jews from the Commonwealth of Independent States has not yet been missed,” said Dinitz, who blamed absorption difficulties and unemployment for the continued slowdown in immigration.

Prospects of renewed economic growth, large-scale infrastructure projects and job opportunities might bring about an acceleration of immigration, said Dinitz. To prepare for such an eventuality, Israel should have ready a national master plan for employment and housing.

Typical of the changing political climate, the Palestinians reacted cautiously to the loan guarantees decision. The local leadership waited for the official reaction of the Palestine Liberation Organization, which was, as expected, negative.

In a statement Wednesday, the PLO blamed the United States for strengthening Israel militarily, thus jeopardizing the peace process.

But Palestinians in the territories said they would have been satisfied with the guarantees had they been made conditional on a settlement freeze. Privately, they said they could live with the loans if the funds did not find their way to the settlements.

JEWISH SETTLERS ARE FURIOUS

The Jewish settlers in the territories, in an angry statement, said Rabin had sold the American Jewish vote cheaply. They charged that he intended to waste the loans to save the “ailing Histadrut sick fund.”

The sick fund, known as Kupat Holim, is now undergoing a serious financial crisis, and the government has so far refused to extend aid beyond the $53 million already promised.

The Likud charged Prime Minister Yitzhak Rabin with making unnecessary concessions to get the loan guarantees.

Moshe Katsav, chairman of the Likud Knesset caucus, said that Rabin had created a linkage between political concessions and economic aid. He said the prime minister tried to create the impression that there were difficulties in obtaining the guarantees, which, he said, would have been extended anyway.

“The dramatic atmosphere in which the guarantees were announced was a mutual need of both Rabin and Bush,” said Katsav.

But one of Israel’s foremost columnists, Nahum Barnea, writing Wednesday in Yediot Achronot, said: “What would have happened if Shamir had won the elections? Would he have received such a red carpet reception, and would he have received the loan guarantees?

“The question is hypothetical, but a reasonable answer is: No. To go that far, Bush and his people were apparently in need of a different Israeli premier, equipped with different slogans and more acceptable to American public opinion.”