U.S. Extends $4 Billion Loan Guarantees to Israel

In an agreement signed in Washington, U.S. Treasury Secretary Timothy Geithner and Israeli Finance Ministry Director-General Doron Cohen agreed to extend the loan guarantees by another four years.

The United States extended its $4 billion loan guarantees to Israel by another four years on Wednesday.

U.S. Secretary of the Treasury Timothy Geithner and Doron Cohen, the director general of Israel's Finance Ministry, signed an agreement extending the loan program until 2016.

According to the agreement, signed during a U.S.-Israel Joint Economic Development Group meeting in Washington, the United States will continue to provide loan guarantees, designed to boost Israel's economic stability, provided it meets specific fiscal targets.

Finance Minister Yuval Steinitz thanked his American counterpart on Wednesday and praised his commitment to economic cooperation with Israel.

"The loan guarantees agreement attests to the special economic relationship between Israel and U.S.," he told Geithner. "I welcome the growing cooperation between the two countries, especially their treasuries."

In 1992, the Americans provided initial loan guarantees of $10 billion at a time of massive immigration to Israel. In 2003, when Israel was facing major economic problems after the outbreak of the second intifada, the current $9 billion in guarantees was provided.

By giving U.S. government backing for Israeli loan obligations, the Americans have enabled Israel to borrow at lower interest rates without involving actual expenditure of U.S. funds.

Due to U.S. opposition to Israeli government investment in Jewish settlements in the territories, the terms of the guarantees in 1992 and 2003 have allowed the Americans to deduct amounts spent on settlement activity from the total amount backed by the United States. Consequently, $1.1 billion of the $9 billion guarantee provided in 2003 has been deducted by the United States to offset such spending.

In 2003 and 2004, the Israeli government issued American-backed bonds in a total amount of $4.1 billion, but has not done so since. Israel therefore still has $3.8 billion of the $9 billion at its disposal

Finance Minister Yuval Steinitz.
Michal Fattal