Officials were optimistic that the two leaders, holding their first summit since Mr Rabin defeated the former prime minister, Yitzhak Shamir, in elections, would reach agreement by today on a new dollars 10bn ( pounds 5.2bn) US loan guarantee to help Israel absorb the latest influx of Jewish immigrants.
Relations between the two countries became especially strained during the last year of Mr Shamir's leadership, when his refusal to halt new settlements in Israeli-occupied Arab territories prompted the US to freeze further loan guarantees to his government. The dispute angered many US Jews, whose support Mr Bush wants back before the November election.
The tensions have eased since the arrival in office of Mr Rabin, who has ended the building of most new settlements and signalled his willingness to cede territory for peace. The US will also welcome moves by Mr Rabin's government to lift laws banning all contact between Israeli residents and members of the Palestine Liberation Organisation.
'The welcome mat is out,' Mr Bush said standing alongside Mr Rabin before the start of the talks. 'Prime Minister Rabin has many friends in the United States, including the man standing beside him.'
Mr Rabin also underlined his government's commitment to making progress in the Middle East Peace Conference, which will resume in Washington on 24 August. 'We would like to give a chance to the peace negotiations,' he said, adding: 'We would like to change the order in our national priorities.'
The setting of the talks at Mr Bush's summer retreat in Maine is meant to be symbolic of the new relaxed atmosphere between the two countries. Mr Rabin last night became one of a select group of leaders to spend the night at the Kennebunkport house with the Bush family.
JERUSALEM - Israeli ministers accused Jewish settlers yesterday of trying to sabotage the summit between Mr Rabin and Mr Bush by defying a building freeze in occupied land, Reuter reports. The settlers, who tried to expand a settlement near Hebron on Sunday and took over houses in Jerusalem's Muslim quarter, vowed to continue moving Jews to the West Bank, Gaza Strip and Arab east Jerusalem.
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