AL QUDS, Oct 21: The United States has offered Israel a huge aid package to shield its economy from the fallout of any military action against Iraq, a senior official revealed Monday as a Tel Aviv daily spoke of a request for loan guarantees totalling 10 billion dollars.

“The Americans have proposed a large aid package to allow the Israeli economy to weather the blow of a US strike on Iraq,” the top official told AFP, asking not to be identified.

The offer was made during Prime Minister Ariel Sharon’s visit to Washington last week, he said.

It is being considered by Israeli experts, who are keen to revive an economy already reeling from the twin blows of the two-year-old Palestinian uprising and a slump in its key hi-tech industries.

“We’re basically talking about credit guarantees and soft loans to stimulate a return of foreign investment to Israel, help relaunch a string of projects and strengthen our credibility in overseas financial markets,” the official said.

After his talks with Sharon last Wednesday, US President George W. Bush told a joint news conference that he understood the high price that Israel was paying for Palestinian “terrorism” but remained convinced of Israel’s enormous economic potential.

More than a decade ago, the United States offered Israel a huge package of soft loans to help the integration of a million immigrants from the former Soviet Union, but then the aid was made conditional on it not being used in the Palestinian territories.

The liberal broadsheet Haaretz said Israel had set up an inter-ministerial committee headed by Sharon’s chief of staff Dov Weissglass and including officials from the Treasury and the defence ministry to discuss how large a package to press for.

The committee was holding out for a total package of 10 billion dollars, including soft loans as well as loan guarantees, the paper said.

It also wanted Washington to allow the 2.1 billion dollars in military aid which it currently gives Israel each year to spend in the Jewish state instead of the United States.—AFP