President Reagan yesterday told Israeli Prime Minister Shimon Peres that the United States is ready to help Israel overcome its economic problems, but decisions about the size and nature of new U.S. aid were postponed until January when a new joint study group is expected to report on Israel's needs.
In announcing formation of the joint economic group to be composed of officials and economists from both countries, Reagan was vague about its functions. But Israeli sources said the group, which will begin work in a week or two, is being given a January deadline to present recommendations that Israel expects to be the basis for new U.S. assistance efforts.
Even before Reagan's annnouncement, congressional sources said that in private talks with members of Congress yesterday, Peres noted that Israel might require $1.5 billion in additional economic aid during the 1985 and 1986 fiscal years. U.S. and Israeli officials were quick to caution, though, that these figures were "highly preliminary estimates" and that a realistic picture of Israel's needs will not be available until the Peres government finishes mapping a financial recovery program, puts it into operation and sees how it is working.
These developments occurred as Peres conferred with Reagan and his top foreign policy advisers about how his new national unity government can overcome the spiraling inflation, balance-of-payments deficit and growing foreign debt that threaten to cripple Israel's economy and plunge the Jewish state into fiscal chaos.
In regard to Israel's desire for the United States to mediate a withdrawal of Israeli forces from Lebanon, Reagan told Peres he is willing to help, "provided the parties concerned want us to play this role."
But a senior U.S. official said later that Israel had not asked formally for U.S. mediation and that a lack of clarity about whether Syria is willing to cooperate in working out a withdrawal agreement continues to make the United States reluctant to become involved at this time.
Reagan, in his public remarks to Peres at the White House, made no specific commitment to any new aid level beyond the $2.6 billion in military and economic assistance that Israel is scheduled to receive in the coming year. Instead, the president spoke in vague terms about cooperating with Israel "in the best way we can," and senior U.S. officials stressed later that it is too early to talk about specific U.S. measures.
However, Israeli delegation sources said Peres had been "pleasantly surprised" at the positive attitude taken by Reagan and Secretary of State George P. Shultz toward the idea of further American help. These sources said that by early next year, when the U.S. presidential election is past and Israel has formulated a broad plan for economic recovery, Peres believes that he can depend on the United States to undertake whatever commitments are recommended by the joint study group.
In the interim, the Israeli sources continued, Peres regards Reagan's statements yesterday as a U.S. "commitment in principle" to provide help if balance-of-payments problems create too great a drain on Israel's hard currency reserves before the recovery measures begin working.
"Should such problems arise, the U.S. government will work closely with the Israeli government to avert them," Reagan said in reference to the balance-of-payments issue. A senior U.S. official, who later elaborated on the president's remarks, said the United States believes that such extraordinary assistance will not be necessary.
The official, who declined to be identified, noted that the aid package being readied by Congress includes $1.2 billion that Israel can use to ease its balance-of-payments drain. The official said that sum, coupled with the measures taken by Israel to curb imports and currency outflows, should keep the balance-of-payments problem within manageable proportions for the time being.
But the official also acknowledged that if Israel does experience trouble in this area, the administration will go to Congress when it convenes in January with a request for help. Neither he nor Israeli officials would specify the means, but the mechanism under discussion is understood to involve creation of an emergency fund from which Israel could draw if its foreign currency reserves fall below a certain point.
The U.S. official, while stating that "it is our full intention to be supportive" of Peres' recovery efforts, refused to discuss any possible U.S. steps. Asked if the administration expects new Israeli aid requests, he replied:
"I honestly don't know. It depends on what progress Israel makes with the program it is formulating to solve its short-term problems and put its economy on a sound basis for future health. Many ideas are being developed. But nothing has been decided yet."
He said the joint economic study group would be headed on the U.S. side by a person of Cabinet under secretary rank, but he did not specify from what agency. He added that U.S. officials serving on the group will be drawn from the State and Treasury departments, the president's Office of Management and Budget, the Agency for International Development, the Council of Economic Advisers and the National Security Council.
Israeli sources said Peres had reiterated in the White House talks his view that his government has cut its budget as deeply as it can. The sources added that no one on the U.S. side had advocated further cuts in the military budget.
In fact, the sources continued, Peres had presented the administration with a request for a four-year plan of U.S. aid to modernize the Israeli defense forces' equipment.