RESIGNING themselves to defeat in their battle with the United States administration for loan guarantees, Israeli officials are putting a brave face on their disappointment, and promising to make the Israeli economy work harder to absorb Jewish immigrants from the former Soviet Union.
But they fear that without the US guarantee on $10 billion of loans, economic growth is bound to slow, and with it the flow of immigrants themselves.
"This does not make our life any easier," senior Central Bank official Amos Rubin said yesterday. "We will have to redouble our efforts ... to make ourselves a more attractive picture to the world business community."
Though no one is predicting an immediate shortage of finance, the denial of loan guarantees has longer term and wider repercussions, analysts here say.
"This could be seen as a sign of lessening US support, and US support is one of Israel's assets in financial and political markets," says Danny Halpern, a former economic attache at the Israeli Embassy in Washington.
At the same time, some officials' hopes that world Jewry can make up for the missing guarantees are misplaced, says Harry Wall, the local director of the Anti-Defamation League, a major Jewish-American organization.
The arrival of more than 350,000 Jews from the former Soviet Union has already inspired "an unprecedented outpouring of support from American Jewry," Mr. Wall says. "American Jews have been tapped about as much as they can be."
The government estimates that it will need to invest around $60 billion over 10 years to build houses and create jobs for the 1 million immigrants expected to arrive from the former Soviet Union. Half of that money, officials say, can be raised locally. The other half will have to come from international capital markets and foreign investors.
But Petahia Bar-Shavit, research director at Bank Hapoalim, Israel's largest bank, cautions that without Washington's loan guarantees to encourage international banks to lend to Israel, "the amount we can raise on the free market could be quite limited."
The guarantees would also have helped create a favorable climate for attracting foreign investors, Mr. Rubin argues. Instead, he says, the government must step up its efforts to reform the state-oriented economy along more free-market lines, as many critics have long argued.
That is the view of Robert Loewenberg of the conservative Institute for Advanced Strategic and Political Studies here. "The denial of the loan guarantees is the best possible thing that could happen to Israel from an economic point of view.
"Israel could come up with these billions of dollars simply by selling off its assets" such as state-owned companies, he says, although he fears it is more likely that "the political elite will squeeze the traditional victims of its policies, the taxpayers."
Raising taxes, however, "is not an optimal solution because it is anti-growth," Bar-Shavit says.
"And with slower growth we are in a vicious circle," adds Mr. Halpern. "Less growth makes it harder to absorb the immigrants, and so fewer of them will come."
Some economists argue that immigration from the former Soviet Union is self-regulating, pointing to the greatly reduced number of immigrants - only 5,000 last month, down from 30,000 in December 1990 - as prospective immigrants hear how hard it is to find work in Israel.
Thus the denial of guarantees, making absorption harder, will also lessen the problem by reducing the number of immigrants needing to be absorbed, they say.
That argument, however, runs counter to Israel's founding principle, to be a home for all Jews.
"I don't believe Israel has the luxury of letting immigration regulate itself," says Deborah Lipson of the Soviet Jewry Zionist Forum, an immigrants' rights group, "because our country's raison dtre is the ideology that guides us in encouraging immigration."