Steinitz: US loan guarantees not in jeopardy

Dispute over settlement construction doesn't give Treasury chief the jitters.

Steinitz at post 298.88 (photo credit: Ariel Jerozolimski )
Steinitz at post 298.88
(photo credit: Ariel Jerozolimski )
Growing tensions between Israel and the United States over construction in Jerusalem and settlements in Judea and Samaria won't affect US loan guarantees, Finance Minister Yuval Steinitz said Thursday. "I don't see that the current situation will involve any limitations. There is no need to be concerned," he said at a roundtable discussion with reporters in Tel Aviv. The US provided Israel with $9 billion in loan guarantees in 2002 as the economy was struggling to cope with a recession amid a wave of Palestinian suicide bombings. The loan guarantees allow Israel to issue bonds on foreign markets at preferable terms, with the US guaranteeing the debt in the event that the Israeli government has trouble repaying it. Israel has $3.8b. left to use by 2011. It has already issued $4.1b. in bonds backed by the US and has had $1.1b. deducted for settlement construction and the security fence. At the end of June, the US government reapproved the loan-guarantees program for Israel despite a dispute over halting settlement construction. "Reapproval of the loan guarantees shows significant faith in Israel's economy by the US government," Steinitz said. "The decision was made on the basis of Israel meeting its fiscal targets. We have not said that we will use the guarantees. We don't want to use them at this point. I don't see the need for it." Steinitz said the local economy was still struggling in the midst of the global economic crisis but was starting to stabilize. "The crisis is not over, but we have removed much of the uncertainty prevalent four or five months ago," he said. "We have an economic plan, the two-year budget has been passed and an economic package deal has been struck. "Over the past two months we have been seeing positive indicators, giving support to cautious optimism that the economy is on the road to stabilization." Steinitz cited June's rise in the country's leading index of economic indicators, the first time that has happened in 11 months; a slowdown in the sharp decline in exports, in particular in hi-tech; signs of a recovery in the institutional market; and the affirmation of Israel's credit rating by Standard & Poor's. "However, unemployment is continuing to rise and is a problem we are dealing with," he said. "The problem of unemployment cannot be tackled without a crackdown on the 300,000 illegal foreign workers spread across the country." Steinitz said he was not concerned by the hike in the annual inflation rate to 3.6 percent in June. "We just introduced government tax increases, consumer demand appears to be improving, we have a low interest rate and the Bank of Israel is running a daily dollar-purchase program," he said. "All these factors have contributed to the rise. One month is just an indicator. I don't think inflation is raising its head. It is too early to tell."