Friday, September 14, 1984 THE DETROIT JEWISH NEWS
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Economic recovery in Israel
carries world-wide implications
BY WOLF BLITZER
Special to The Jewish News
Washington — The New York
financial market is waiting for a
1 1 /4Miles South Of Almont On Van Dyke (M53)
signal from Washington about the
prospects of an Israeli economic
6 Miles North of Romeo
recovery. The stakes are ex-
tremely high for Israel in this
r— i r- -
In recent years, Israel annually
has borrowed between $600 mil-
lion and $800 million from the
major American commercial
COMMERCIAL & RESIDENTIAL
short-term loans, which are in
k addition to direct U.S. gov-
1 ernmental grants, charitable con-
tributions from the Jewish corn-
munity and purchases of Israel
Bonds, have been very important
making ends meet for strapped
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But right now, according to U.S.
1 and Israel officials in Washing-
ASK FOR SCOTT OR SAMMY WOOLF
ton, Israel is facing some new
problems in obtaining this usu-
available commercial credit.
1 ally There
have been all sorts of
18161 W. 13 Mile Rd.
very negative scare stories ap-
pearing in the American and Is-
raeli press about the troubles fac-
ing Israel, especially in connec-
tion with its mounting external
debt and the dangerously high
outflow of foreign exchange.
These reports naturally tend to
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The fact that other debtor na-
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tions — such as Brazil and Poland
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— are also in deep financial trou-
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ble and may not be able to repay
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their outstanding loans to these
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very same banks has not made
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things any easier for Israel.
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In the short run, Israel may be
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forced to pay a premium on al-
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ready high commercial interest
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rates for fresh loans. If things con-
tinue to worsen, however, this
source of additional funds will
simply dry up — premium or not.
Israel, under such worse case
circumstances, will no longer be a
credit worthy nation.
Traditionally, the New York
banks have looked to Washington
A Gift of Faith to Celebrate the New Year...
for some indication in the stabil-
ity of the Israeli economy. When
the U.s. government is providing
Israel with large-scale financial
assistance, the banks in New
York are usually prepared to fol-
If economic and political ties be-
series of magnificent plates by
tween the U.S. and Israel are in
James Woods. Each plate, 101/2
inches in diameter and finish-
relatively good terms, with large
ed with wide gold border,
scale U.S. aid forthcoming every
depicts one of the four most
year, the bankers in New York
important events in the
tend to see Israel as a basically
Jewish calendar year.
good risk. The assumption is that
Washington will not let Israel go
A numbered limited edition
with worldwide release of
Israel may have a $22 billion
only 7500. Give a complete
external debt — one of the highest
set. There is no more appro-
per capita in the world — but
priate gift of faith or
some $9 billion of that sum is to
finer gift of art.
the U.S. government with an-
other $5 billion to largely Jewish
Regular Retail Price $250 each
holders of Israel Bonds and other
Gold Place Price $200 each
Israeli securities. Most of this
money is in the form of very long
. i 2 MILE ROAIL
term loans, at relatively low
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The Gold Place
The balance of the external debt
is considered manageable, given
26263 West Twelve Mile Road
Israel's gross national product.
1st blk. E. of Northwestern Hwv.
The fact also remains that Is-
Southfield, Michigan 48034
rael has not yet had to default on
any loan payments to governmen-
"Celebration of Faith" Plates
tal, commercial or private
One reason why Israel and its
supporters in Congress prefer to
increase aid grants to Israel every
year rather than reschedule or
even waive previous loans is the
fear that such steps might seri-
ously damage Israel's reputation
among banking circles.
House, have been very actively
involved in helping Shultz — as
have other prominent American
economists from Harvard, MIT
Until recently, Paul Boeker, a
economist in the U.S. foreign
service, had chaired the State De-
partment's task force on the Israel
economy. But Boeker has just
been appointed the new ambas-
sador to Jordan. Taking his place
will be Peter Rodman, the inf-
luential director of the State De-
partment's Policy Planning Staff
waiting for word that and
a former long-term associate
of Henry Kissinger.
Israel has come
What Shultz certainly does not
forward with a
want, according to his aides, is
simply an economic "bail out"
blueprint to tackle its program
for Israel. Providing Is-
rael with more economic grants —
without new economic measures
implemented in Jerusalem -- will
not do. He has made clear to his
Thus, the key in maintaining
advisers — as well as to the Israeli
Israel's still decent credit rating is
government — that Israel must
come forward with a fundamental
The New York bankers, of structural change, especially in
course, recognize all of this. That's
connection with its spiralling in-
why they are today considerably flation.
more skittish in making new
This will result in some real
money available to Israel. Israel
pain for the Israeli government as
is still able to obtain credit, but it
well as for the average Israeli citi-
is becoming more difficult.
zen. Unemployment, already
This could change if the Reagan
hovering around the six percent
Administration — and especially
mark, is likely to increase. Sub-
Secretary of State George Shultz
sidies in a whole range of areas
— provides Israel with a renewed
will be curtailed.
stamp of approval. Israel's credit
During the recession of the
worthiness would automatically
mid-1960s, there was ten percent
be improved. But that could take
unemployment in Israel, result-
ing in all. sorts of negative social
The Administration is waiting
ramifications including increased
for word that Israel has come for-
emigration. This is likely to be
ward with a blueprint to tackle its
one price paid for any economic
economic woes — a plan which
will drastically cut governmental
Israeli officials do not believe
spending across the board in order
that the Reagan Administration
to deal simultaneously with
will directly link additional U.S.
run-a-way inflation and mount-
aid to specific political decisions,
ing balance of payment deficits.
such as freezing West Bank set-
"The ball is clearly in our
tlements. In the past, such blunt
court," an Israeli economic official
linkage has usually failed, given
the traditionally strong base of
Shultz, an economist who has
support which Israel maintains in
taken a great personal interest in
Congress. Certainly, no such di-
the Israeli financial scene, has in-
rect linkage is anticipated before
formed Israeli officials that the
the November election.
U.S. will indeed be prepared to
help Israel in the coming months.
But in high-level diplomatic ex-
changes, Shultz and other U.S. of-
ficials have stressed that they
want to deal on this matter with
the new Israeli government.
back home in Syria
Clearly, U.S. officals feel the
July 23 elections in Israel were
Bonn — Rifaat Assad, the
quite expensive in terms of Is-
brother of Syrian President Hafez
rael's national economic health.
Assad, has been declared "per-
The Americans have tended to
sona non grata forever" in his
homeland, The New York Times
blame election politicking for
seriously deteriorating what al-
reported this week. The Times'
ready had been a shaky economy.
story was based on an interview
U.S. officials are very serious
with Syrian Defense Minister
when they point out that Israel
Mustafa Tlas which appeared in
Der Spiegel, a West Grman maga-
may not be able to afford another
round of elections in the near fu-
President Assad sent his
Shultz has put together a
brother to the Soviet Union and
high-powered team of American
Geneva last year, presumably to
economists to help him in study-
gain necessary experience in
ing the Israeli problems. Herbert
foreign affairs so that he could
Stein and Paul McCracken, both
succeed the president, who has
former chairmen of the Council of
reportedly been in ill health for
the past 18 months.
Economic Advisers in the White