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US renews Israel loan guarantees despite public dispute about the construction of illegal settlements in the West Bank

The Illegal Israeli settlement of Har Homa built on annexed Palestinian lands.

Date: 01 / 07 / 2009 Time: 16:17
Bethlehem – Ma’an –

The US has renewed a program of massive loan guarantees to Israel in spite of an ongoing dispute about the construction of illegal settlements in the West Bank.

According to Reuters, the program allows Israel to sell bonds and take out loans with the backing of the US. The nine billion dollar program was originally approved in 2002 to help Israel cope with an economic downturn.

According to Israeli economist Shir Hever of the Alternative Information Center in Jerusalem, the loan guarantees are actually contradictory to the US’ diplomatic stance on settlements.

“The US is allowing its money to be used to violate international law,” Hever told Ma’an in a phone interview. “The US cannot claim to be an impartial arbiter,” because of its overall economic support for Israel.

Hever also said that the issue is much larger than loan guarantees. According to Hever, Israel is also the number one recipient of direct US aid, for example receiving three billion dollars per year in military aid, which it can use to buy weapons from Israeli companies, whereas other countries are required to buy from the US.

Because US guarantees make it possible for Israel to borrow money at lower interest rates, Israel’s government has prepared a budget whose size is “unparalleled in its history,” Hever said, noting that much of the increase is accounted for by spending on the police and military.

“Israel has been able to get away with things no other country would,” Hever said, referring to Israel’s recent wars, which would have “driven any other country to bankruptcy.”

The US did deduct 1.1 billion dollars from the original sum as a result of concern over settlements and the West Bank separation wall, Reuters reported.

Israel still has 3.8 billion US dollars to use after the deduction and using 4.1 billion dollars in bonds, Reuters said. According to Hever, Israel also has unused US loan guarantees left over from 1996.

The deal is conditioned on Israel’s meeting fiscal targets. Israel must meet a 2009 budget deficit target of 6 percent of gross domestic product and ensure that spending does not increase, both as a percentage of Gross Domestic Product and in comparison to the previous year.

In 1992 US President George HW Bush conditioned loan guarantees on a freeze in construction of illegal West Bank settlements, angering Israeli Prime Minister Yitzhak Shamir. His successor, Benjamin Netanyahu, was able to reach an accommodation with the US, freezing some construction but not all, and convincing Bush to reinstate the loan guarantees.

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