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Rabin to seek promise of U.S. loan guarantees


JERUSALEM -- It's back: The issue of loan guarantees to Israel has returned like an old summer rerun.

Yitzhak Rabin, the new Israeli prime minister, arrives in the United States today. On Monday and Tuesday he will see President Bush in Kennebunkport, Maine. He hopes to leave with a promise the United States will guarantee $10 billion in loans.

He may not get all of it. But U.S. officials have been dropping broad hints that Mr. Rabin will secure a promise for at least the first installment of guarantees, about $2 billion, in return for Israel's new enthusiasm for the peace talks.

He also will leave after a week with proof that his election has produced a quick U-turn in U.S.-Israel relations.

Mr. Bush and the previous prime minister, Yitzhak Shamir, actively disliked one another. The rapport between the new prime minister and the president is so much better, Mr. Rabin is thought to be carrying his tennis racket.

But hard issues, not soft tennis lobs, will be the main task of this visit. With some success, both men look to be winners.

Mr. Rabin desperately needs to embark on massive borrowing from international banks to perform the resuscitation of Israel's ailing economy that he promised in his campaign. So bad is Israel's financial standing on its own, it must have the United States as a co-signer to get the loans.

"The guarantees are needed like oxygen," an Israeli newspaper, Al Hamishmar, observed this week. "If there is capital . . . it will be possible to solve the problems that threaten to transform Israel into a Third World country. It will be possible to raise the quality of life to a European level."

Watching with interest from afar will be the Palestinians. The Bush administration blocked the loan guarantees last year because Mr. Shamir refused to stop putting up Jewish settlements in Palestinian territories.

Mr. Rabin's new government has imposed a partial freeze on the settlements, and has made it progressively tighter.

But it has said it will finish the 7,000 to 10,000 homes under construction, and will continue to build in some areas. That falls far short of the previous demands by the United States and the Palestinians for a total freeze.

If the United States gives the loan guarantees anyway, "that would be a very bad sign" for the peace process, said Faisal

al-Husseini, head of the Palestinian delegation to the peace talks.

"We believe all the settlement activity must be stopped completely, without telling us about buildings that have been started," he said yesterday.

But Mr. Husseini also struck a conciliatory note in discussing the negotiations, which are due to resume in Washington Aug. 24.

"We believe that the zero-sum game is over," he said. "Not everything good for Israel is bad for us, and not everything bad for us is good for Israel."

Indeed, Mr. Rabin is also expected to tell Mr. Bush about Israel's intention to propose that the Palestinians hold a general election to form a body to oversee autonomy. If there is agreement on the size and scope of this body, there may be elation among the Palestinians.

.5l Both sides are returning somewhat reluctantly to Washington to resume the peace talks, having canceled plans to hold them in Rome.

Their agreement to move the talks back to Washington is seen as a favor to Mr. Bush, who wants a close-up demonstration during the campaign of his chief foreign affairs achievement, the Middle East peace talks.

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