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>Israel Faxx
>JN June 4, 1998, Vol. 6, No. 101

U.S. May Discontinue its Mediation

By Al Pessin (VOA-Jerusalem)

Ambassador to Israel Ned Walker says the United States will decide in the next several days whether to continue its Middle East mediation effort. Walker told reporters there is no firm date for the decision, but he said the timeframe is "very short...days rather than weeks."

"What's going to happen is that there will be a decision made as to whether it's fruitful to continue or not. In other words, whether there is going to be an agreement or not. It depends on how the progress goes."

US officials have been saying for a month that they are close to declaring a deadlock in the Israeli-Palestinian talks. That would be widely seen as implicitly criticizing Israel, because it has not accepted the US compromise plan and the Palestinians have.

But President Clinton has repeatedly delayed making such a declaration to give Israel more time. Now, Walker appears to be confirming press reports that there is a new US deadline of sometime next week.

Should U.S. Aid to Israel Continue?

By Patricia Golan (VOA-Jerusalem)

At roughly $3 billion a year, United States aid to Israel is the largest single component of America's foreign aid budget. But with today's thriving economy in Israel, Americans and Israelis are asking if the big aid package is still necessary?

There were years in Israel's 50-year history when American assistance was crucial to keeping the country from economic ruin. But those times -- and the Israeli economy -- have changed.

Foreign investment in Israel continues to break records. It's tripled in just the past year alone, in spite of the continuing uncertain political situation, and the fact that the peace process with the Palestinians seems hopelessly stuck, and with the recession and rising unemployment.

To some outsiders, it is bewildering that things are so good when they're so bad. So what is going on here? Dan Propper is head of the Israeli Manufacturers' Association. He attributes the investment to Israel's generally favorable economy.

"Of course the peace process, everyone would have loved to see a much quicker one. But as long as the peace process is going on -- and even if it's in a kind of a slow down -- the total environment of doing business in Israel is positive."

Propper attributes this growth to such things as the end of the Arab boycott, the privatization of state enterprises and Israel's amazingly successful high-tech industry.

At present, Israel gets about $1 billion annually in civilian aid and almost $2 billion in military aid. But with average Israeli earnings on a par with that of many Western European countries, the question being asked more and more these days is why should Israel continue to get such big handouts from "Uncle Sam?"

Earlier this year, Israeli Finance Minister Yaacov Ne'eman actually went to Washington, proposing a phase-out of US civilian aid over the next decade. But recent Israeli news reports say more US military aid may be on the way. To date, Israel has been required to spend three quarters of all military aid money on American-made military hardware. Under the deal, Israel will also reportedly be allowed to spend more than it currently does with Israeli-based military contractors.

Hebrew University economist David Lev-Hari says Israel can easily wean itself from that money. But giving up the larger military aid package is another matter. Lev-Hari points out that the military aid is considered a grant -- while the civilian part is a loan.

"As far as loans, we can also take loans on the international money market, the difference being mainly the rate of interest so I don't think there's going to be major effect of gradual reduction of the civilian help."

But will reducing aid lessen America's political leverage on Israel? During the administration of President George Bush, the US government withheld $10 billion in loan guarantees to help new immigrants because it was displeased with then-Prime Minister Yitzhak Shamir's settlement policies -- guarantees that were eventually granted to Israel under Prime Minister Yitzhak Rabin.

While analysts say there was no real long-term economic consequence of this action, it did have some political impact. It was a factor that forced Shamir to go to Madrid for the first Middle East peace conference.

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