Settlers, Palestinians Rue Deal On Loan Guarantees to Israel

ISRAELI leaders may be satisfied that the thorny issue of United States loan guarantees has finally been resolved, but Palestinians and Jewish settlers both greeted Tuesday's news with skepticism.

While Palestinian negotiators huddled in a meeting, analyzing the scant information President Bush and Prime Minister Yitzhak Rabin provided at their press conference in Maine, the settlers were making contingency plans and drawing attention to their determination to further their cause.

In the heart of the crowded Muslim quarter of Jerusalem's ancient walled city, a group of settlers and right-wing supporters inspected buildings they hope to take over as part of their continuing drive to expand the Jewish presence here.

Their moves have been condemned as provocative by government ministers, and a special committee has been set up to monitor settlement activities in the old city. The settlers are now intent, for instance, on converting one abandoned house - an uninviting hovel at present - into a hostel where right-wing members of parliament can stay while the Knesset is in session.

"It'll be like a five-star hotel in a month," said Gonen Segev, of the hard-line Tsomet Party, whose leader, Rafael Eitan, has agreed to lead a campaign to raise private money to fund continued Jewish settlement.

Mr. Rabin's visit to the US has been played against a backdrop of settler complaints that the government is bowing to US pressure to abandon building programs in the occupied territories.

Bob Lang, a spokesman for the Council of Jewish Communities in Judea, Samaria (the Biblical names for the West Bank) and Gaza, said he was happy to see an improvement in relations with the US, but said the price was unacceptable.

"We're very disappointed to see that Rabin is willing to sell off Judea, Samaria, and Gaza for $10 billion," he said. "Have we sold our morality and values for money? It seems we have." Palestinians gloomy

Mr. Lang said the Palestinians were "the big winners," but Palestinian leaders were hardly celebrating. Members of the Palestinian delegation to the Middle East peace talks said they needed time to examine what had been agreed to, but sounded gloomy.

"If the loan guarantees are given while settlement activities are continuing, then this of course invalidates the role of the US as an impartial peace broker," said Hanan Ashrawi, the delegation's spokeswoman.

Saeb Erekat, an outspoken member of the delegation, went further, suggesting that American policy has shifted. "The danger is that settlements will now be legalized," he said.

Palestinians have warned that granting the loan guarantees without a total freeze on settlement construction will harm the peace process. Waiting for the PLO

The decision on what action to take will come from the leadership of the Palestinian Liberation Organization in Tunis, but privately, delegation members expressed deep pessimism.

Reports that the US administration only intends to make relatively small deductions from loan guarantees for money Israel spends on completing construction already under way in the occupied territories drew sharp criticism.

"Rabin got what he wanted without doing anything in return," said Mr. Erekat.

"It seems to me that we've been had," he added.

In government circles, the loan guarantee agreement - expected ever since Rabin led the Labor Party to victory at the polls in June - was greeted with satisfaction.

"The guarantees are important first of all because they sent a signal to government, banks, and investors of the world that the Israeli government has the faith of the American government," said Finance Minister Avraham Shohat.

Rabin will be hoping that the American signal will be enough to convince other countries, notably Germany, to follow suit. Together with savings derived from curbs on settlement activity, foreign loans will help to rescue an economy buckling under the strain imposed by the rapid arrival of 400,000 immigrants, almost all of them from the former Soviet Union.

Analysts say the US Congress will also be watching for signs of continued economic reforms.

"They want to see less subsidies, less government involvement and a more open economy," said Dan Halperin, a former economic minister at the Israeli Embassy in Washington. Immigration tailing off

Mr. Halperin also suggested that the loan guarantees might be conditioned on a continued flow of immigration, which has tailed off this year, largely because reports of unemployment and social deprivation have filtered back to would-be immigrants in the former Soviet Union.

"I think when the president mentioned up to $10 billion, what he meant was that the money will be allotted according to the rate of immigration to Israel," he said.

Economic and settlement issues aside, resolution of the loan- guarantees issue has a symbolic value not lost on Israelis or Palestinians. After two years of increasingly acrimonious dealings between the Bush administration and the hard-line government of Prime Minister Yitzhak Shamir, US-Israeli relations are back on track. "Relations are restored to what I would call the status quo ante Shamir," said Halperin.