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Israeli Financial Officials Warn Against Denial of Loan Guarantees

February 12, 1992

JERUSALEM (AP) _ Government finance and banking officials warned Wednesday of damage to Israel’s economy if the United States does not grant $10 billion in loan guarantees to help absorb immigrants from the former Soviet Union.

″If we don’t get the guarantees, the economy will not be wiped out ... but we will have lower growth, there will be less immigration, there will be higher unemployment, and I assume there will be lower investments,″ Bruno Frankel, governor of the Bank of Israel, said on Israel television.

Frankel said Israel also would have a harder time getting commercial loans in a competitive international market.

Israel’s finance minister, Yitzhak Modai, said Wednesday that a denial of the guarantees would be tough on the Israeli economy, but said it would be ″far from a disaster.″

He added that the loan guarantees were likely to come through. ″I am basically optimistic, because there is moral, humanitarian justification as well as practical justification,″ he told Israel television.

Israel wants the guarantees to pay for housing and create jobs for the large numbers of immigrants from the former Soviet Union. Washington has linked the issue to a demand that Israel stop building settlements in the occupied West Bank and Gaza Strip.

The U.S. administration views settlements as an obstacle to peace. Palestinians have made a settlement freeze a condition for continuing Middle East peace talks in Washington.

Modai and others in Prime Minister Yitzhak Shamir’s government have said they would not accept a construction stop.

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