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Last Updated:  Thursday, 20 March, 2003, 21:13 GMT
Doubts over US aid to Israel
Israeli models pose in front of US Patriot missiles
Israeli models pose in front of US Patriot missiles, as to some military aid has become a fashion accessory
Israel says the US has offered the country $10bn (6.4bn) to bail it out of the worst economic crisis in its history.

Israel's Finance Ministry said the package consisted of $1bn (640m) in direct military aid and $9bn in loan guarantees.

But, several hours after Israel announced the deal, the US said it had not made a decision about the aid package.

US State Department spokesman Richard Boucher told reporters at a briefing: "We don't have any new decisions on that.

"The request has been made by the Israelis. The status today is the same as yesterday. We are looking at it. We are considering it."

War budget

The 30-month-long Palestinian uprising against Israeli occupation and the global economic slowdown have plunged Israel into its third year of recession.

The country is the biggest recipient of US aid worldwide and initially asked for $4bn (2.5bn) in military aid and $8bn in loan guarantees.

The US would deduct from the loan guarantees any Israeli expenditure on settlement activities in Palestinian areas.

The package is part of President George W Bush's war budget and even if it is agreed by the President it will still need approval by the US Congress.

Economic troubles

Israel said that US National Security Adviser Condoleezza Rice pledged the aid to Israeli Finance Minister Benjamin Netanyahu on Wednesday.

"Rice told Netanyahu that the (Bush) administration decided to raise the amount of the guarantees by $1bn over what had been planned because the Americans were impressed by the economic plan that has been presented to the government," Israel's finance ministry said in a statement.

Israel's economy contracted by 1% in 2002 after a 0.9% fall in 2001 and the budget deficit is running at 6%, twice the forecast for 2003.

Mr Netanyahu on Monday announced government spending cuts and reductions in the public sector wage to rein in the budget deficit.

Israel already receives $3bn a year from the US, mostly as military aid.

Israel and the Palestinians



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