\/=

Peres was "a valued friend, a
statesman, and a spokesman
for peace, and a leader of the
Government of Israel, a coun-
try with whom the United
States has deep and special
ties." In insisting that some
impressive progress has
been achieved in recent
weeks in the peace process,
Reagan added: "No one has
done more than Prime Min-
ister Peres to that end.
His vision, his statesman-
ship, and his tenacity are
greatly appreciated here."
Thus, the relationship be-
tween Washington and Jeru-
salem has clearly bounced
back from the tensions which
erupted after the Jonathan
Jay Pollard spy scandal last
November. Indeed, neither
Peres nor Rabin was even
asked to discuss the Pollard
case during any of their
numerous appearances before
the U.S. news media.
The only time it came up at
all was during the briefings
the Prime Minister and
Defense Minister had with
the Washington-based Israeli
press corps. Indeed, at one
point, Rabin even berated an
Israeli journalist for asking a
question about Pollard, point-
ing out that the subject was
not raised during any of his
meetings in Washington.
Peres made the same point
during one of his question-
and -answer sessions with the
Israeli press.
. U.S. officials had a strategy
beaping all of their praise
j3n. Peres. Yes, they truly .ad-
'mire the Prime Minister. And
yes, they will miss his style of
operation. But they were also
hoping to put some subtle
pressure on Shamir.
By constantly referring to
the wonderful development of
American-Israeli relations
these past two years — since
Peres took office — they were
serving notice on Shamir that
any deterioration in the corn-
ing months would be blamed
on new policies coming from
Jerusalem. It was up to
Shamir to maintain this cur-
rently very cordial state of
ties by continuing the thrust
of Israeli policy as enunciated
these past two years under
Peres.
The Americans did not
totally view Peres as a "lame
duck" leader. For one thing,
they suspect that he could
once again emerge as Prime
Minister if the National
Unity Government should
collapse at some point follow-
ing the rotation. And he will,
after all, become Deputy
Prime Minister and Foreign
Minister -L not insignificant
portfolios.
Administration officials in
Washington are not exactly
holding their breath waiting

for a political crisis to burst
out in Jerusalem in the next
few months. Americans are
aware of the basic popularity
of the coalition among the
Israeli public, largely because
of the remarkable economic
turnaround these past two
years. But they know that the
potential for a political crisis
is always there, given the very
serious differences between
Labor and Likud on the
future of the West Bank and
Gaza.
At the same time, the Ad-
ministration is very aware of
the benefits for Israel re-
sulting from the coalition
agreement. No one is more
sensitive than Shultz, for ex-
ample, to the fact that a na-
tional unity government can
get away with more painful
economic reforms and aus-
terity measures than a more
modest Labor-led or Likud-
led government. By combin-
ing forces, both parties are
forced to accept the blame for
unpopular decisions. One
party cannot overly swipe
away at the other.
The fact also remains that
the Administration is expect-
ing Israel to follow through
on the economic front by pro-
moting policies which will
lead to real growth. The
Americans are urging Israel
to accept more budget cuts
and more farreaching tax
reform which should stim-
ulate the economy. They want
more "privatization" of the
government-owned indus-
tries. There are investment
opportunities which could
spark some real capital
formation.
"Prime Minister Peres and
his colleagues in Israel's Na-
tional Unity Government
have achieved remarkable
success in stabilizing their
economy," Reagan said.
"They're now turning their
attention to growth with our
full encouragement and sup-
port."
All of these economic issues
would be discussed in greater
detail in late September when
Finance Minister Moshe
Nissim was due in Washing-
ton for talks with Shultz and
Treasury Secretary James
Baker. Nissim would also be
attending the annual meet-
ings of the World Bank and
the Interantional Monetary
Fund.
Given the basic goodwill
toward Israel right now, there
is a prevailing assessment in
Washington that the U.S.
eventually will find a way to
reduce the interest rates on
outstanding Israeli loans
from the United States. Ex-
actly how that will be for-
mulated remains unclear. But
there is confidence it will

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