Israel doesn't see U.S. limiting loan guarantees

Ha'aretz
Israel does not expect the United States to limit use of loan guarantees despite a dispute with Washington over building in East Jerusalem and in West Bank settlements, Finance Minister Yuval Steinitz said on Thursday.

"I don't see any limitations on the horizon. It's not time to be concerned about that," Steinitz told reporters.

He added that Israel would prefer not to use them.

"I don't see any need to use them in the near future," Steinitz said. "But it's good they are there."

The finance minister noted that prior disputes over settlement building have led the U.S. to deduct rather than cancel the guarantees.

In 2002, to help Israel deal with a recession caused by a global downturn and a wave of Palestinian suicide bombings, the U.S. provided a package of $9 billion in loan guarantees, where Israel could sell bonds internationally with the backing of the United States.

The guarantees have been instrumental in allowing Israel to raise money more cheaply and in sovereign ratings upgrades by credit rating agencies.

Israel still has $3.8 billion left to use by 2011 after already issuing $4.1 billion in bonds backed by the U.S. and a $1.1 billion deduction for Israeli settlement building and concerns over the West Bank security fence....

Last month, the U.S. re-approved Israel's loan guarantee program, subject to Israel meeting fiscal targets. It came despite the rift between Israel and its main ally over Israel's rejection of U.S. demands to halt settlement building.

The tensions have grown as Israel also plans to build a residential project in East Jerusalem.

In recent years, Israel has opted to issue bonds without U.S. backing. Its latest offering using its own creditworthiness was a sale of $1.5 billion in 10-year notes this past March at 262.5 basis points over U.S. Treasuries.

Steinitz said Israel's economy remained weak but was starting to stabilize.... Full story