Secretary of State George P. Shultz denied yesterday that the Reagan administration seeks to impose economic austerity on Israel, but he criticized the Israeli government's recovery plans, and refused to say when the administration will act on a request for $1.4 billion in emergency aid.
Testifying before the House Appropriations subcommittee on foreign operations, Shultz sought to fend off growing congressional pressure for a decision on the aid package, designed to help Israel halt its runaway inflation and restructure its economy.
"If what you do is simply postpone the day in which decisions have to be faced up to, you really haven't done that much of a service . . . ," Shultz said. "I don't think the answer is just saying, 'Let's put a lot of money in the pot.' Well, I'm for putting a lot of money in the pot if we can get it in the right kind of pot."
In a partial bid to ease congressional impatience, Shultz acknowledged that the administration, as expected, will ask Congress for $1.2 billion in economic aid for Israel in fiscal 1986, the same as this year. That would be in addition to $1.8 billion in military aid already requested for fiscal 1986.
Prime Minister Shimon Peres' government also has asked for an additional $1.4 billion emergency aid, with the first installment of about $800 million to be submitted to Congress as a supplement to the fiscal 1985 budget.
But Shultz, expressing dissatisfaction with Israel's plans for economic recovery, refused to make a commitment, saying, "At the present moment, I think there is more attention on the fiscal '86 level. The fiscal '85 supplemental is a more difficult issue."
His criticism came in response to a charge by Rep. Jack Kemp (R-N.Y.) that the administration appears to be treating Israel "like a Third World country is treated by the International Monetary Fund." Kemp asked whether the emergency aid was being withheld to force Israel to devalue its currency and to take other austerity measures advocated by the administration.
"We don't have a conditionality approach to Israel," Shultz replied. "We're not trying to say, 'Do this, do that, do something else.' But when we're asked for our opinions, we give them."
"There are many aspects of their program that don't appeal to me," he said. "One of them is their wage-and-price control approach . . . . Now, my opinion is that wage-and-price controls are not the way to go. But that's the way they're going. And I wish them success. If they can succeed in that, I think that's fine. My fingers are crossed."
The United States, Shultz added, is trying to work with the Peres government "to look beyond the immediate, intense difficulties that they have and see what should be done for the long-term future of that economy. . . . I think the more money we invest in that, the better off we're going to be."
Shultz also reiterated that the United States might be willing to deal with a proposed Jordanian-Palestinian delegation, if it excludes members of the Palestine Liberation Organization and if the delegation appears willing to enter direct peace talks with Israel.
The Israeli government, while saying it would negotiate with such a group, opposes any meeting between the delegation and the United States that does not include Israel.
Despite Israeli objections, Shultz refused to rule out U.S. contact with such a delegation. He said there are respected Palestinian leaders who are not PLO members, and added that if they could be induced to cooperate with Jordan, "that is the sort of delegation you're looking for."
Shultz criticized a House subcommittee's action Wednesday in making $122 million in aid for Jordan contingent on King Hussein agreeing to direct talks with Israel. He said that "actions in Congress that pin down Jordan or that seem to be anti-Jordan are counterproductive, particularly at this delicate point" in the effort to restart the Mideast peace process.
Shultz said that Assistant Secretary of Defense Richard N. Perle "spoke personally" earlier this week when he criticized British Foreign Secretary Geoffrey Howe for questioning President Reagan's pursuit of a space-based antimissile defense. He added that "a number of us were surprised" by the comments.
Asked whose comments he had been surprised by, Shultz replied, "By Mr. Howe's." He paused and added: "And Mr. Perle's."