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Nation’s Ills Await ‘Deus ex Machina’

JERUSALEM — Israeli policy-makers are growing increasingly nervous about the Bush administration’s mounting diplomatic difficulties — at NATO, in Turkey and at the United Nations Security Council — and the increasing likelihood of a delay in the launch of an American campaign against Iraqi President Saddam Hussein.

Israel’s top political, military and economic echelons have come to regard the looming Iraq war as a virtual deus ex machina that will turn the political and economic tables and extricate Israel from its current morass.

Prime Minister Sharon launched his new government this week amid fervent pledges of new initiatives to halt decline on the diplomatic and economic fronts. But as Sharon himself realizes, fulfilling his promises will depend largely on the outcome of the expected war against Iraq. The new government’s policies, especially regarding the economy and the peace process, are therefore being conceived as stopgap holding patterns until the Iraqi dust settles.

Sharon’s advisers also worry that the prolongation of the pre-war period is creating new tensions in the hitherto close relationship between Jerusalem and Washington. Officials here were taken aback by the unusually critical tone of State Department spokesman Richard Boucher’s reproach this week of the latest Israeli offensive against Hamas in Gaza. Policymakers were even more concerned about the administration’s apparent decision to postpone action on the Israeli request for $8 billion in new loan guarantees, and its apparent reluctance to grant even half of the additional $4 billion Israel has requested in direct aid.

Optimists viewed the cold winds from Washington as only temporary, part of the administration’s efforts to maintain at least minimal support in Europe and the Arab world for its Iraqi war plans. But the chill was enough to send shivers down the spines of top Treasury officials, and to further complicate the already formidable challenges awaiting the new finance minister, Benjamin Netanyahu.

The realization that American financial assistance may be postponed has already dampened the initial enthusiasm for Netanyahu’s appointment among Israel’s financial and economic leaders. Netanyahu had accepted the Treasury portfolio only reluctantly, after being outmaneuvered by the wily Sharon and effectively deposed from the Foreign Ministry.

The business community views Netanyahu as economically savvier and politically stronger than his predecessor, incoming Foreign Minister Sylvan Shalom. Still, the onetime prime minister is now saddled with the Herculean and traditionally thankless task of overseeing the economy. America’s hesitation to bail Israel out in the next few months will only make the job harder.

Netanyahu initially planned to reverse the Treasury’s tendency toward balancing deficits via massive budget cuts. Instead, he was expected to try to revive the sluggish Israeli economy through immediate tax cuts and investments in infrastructure. But new government economic figures for February show that the budget deficit has ballooned far beyond initial projections. Lacking an early infusion of American funds, Netanyahu will be left with no alternative but to make draconian budget cuts, exacerbating social hardship and unrest in the country.

The expected recessionary budget will serve to galvanize and unite the fractious opposition parties in the Knesset, which consist of the ultra-Orthodox Shas and United Torah Judaism, on the one hand, and Labor, the dovish Meretz, the social-democratic Am Echad and the Arab parties on the other. The one thing that could unite the 52-member opposition, despite its ideological disparity, is socio-economic populism. Given the economic forecasts, the opposition is now expected to make life difficult for the government, even though it lacks the votes to block policies.

Nor can the government expect any immediate change in the peace process with the Palestinians, which is now considered by nearly all credible observers to be pivotal to any real economic revival. Israel remains skeptical of Yasser Arafat’s pledge to appoint a new Palestinian prime minister, believing the chairman intends to effectively retain power for months to come. Moreover, Sharon’s aides are about to submit to Washington a small mountain of reservations to the latest draft of the American-European “road map” to Middle East peace, which will result in a lengthy Bush administration review process. Given the right-wing makeup of the new Israeli Cabinet, with its built-in majority against even the modest concessions advocated by Sharon in recent months, chances of early progress in the peace process appear remote indeed.

Most Israelis, lacking any cause for optimism in either the political or economic spheres, are now pinning their hopes on civil reforms, especially in synagogue-state relations. The appointment of the top two Shinui leaders, Yosef “Tommy” Lapid and Avraham Poraz, to head the ministries of Justice and Interior, respectively, is generating far more public curiosity and media interest than any other appointees.

Lapid has already ordered his ministry to prepare legislation permitting the registration of marriages between Jews who are barred from rabbinical nuptials for halachic reasons. The new arrangement is still light years away from Shinui’s dream of introducing civil marriage to the general population, but it does put a significant dent in the Israeli rabbinate’s monopoly on marriage.

Poraz has been even more sweeping in the changes he is signaling. The Interior Ministry, a longtime Shas stronghold, is responsible for key areas including population registry and local government. Poraz’s first decision was to grant temporary resident status to the non-Jewish mother of one of the Russian-born victims of the July 2001 terrorist attack at the Dolphinarium discotheque in Tel Aviv. Poraz said the new Israeli government would adopt a more “humane and universalist” approach to non-Jews, including granting Israeli citizenship to non-Jewish residents with close relatives serving in the army. His statements have further inflamed the already simmering resentment of ultra-Orthodox politicians, who have responded to their exclusion from the Sharon government by proclaiming that the new “unholy alliance” between Shinui and the National Religious Party signals no less than “the beginning of the end of the Jewish state.”

Lapid, Poraz and other Shinui ministers have also vowed to fight for what is known as the “rule of law,” a euphemism for safeguarding the supremacy of Israel’s Supreme Court. Here, though, they will face a tougher battle. Sharon’s nominee to represent the government on the Judicial Appointments Committee, incoming Transportation Minister Avigdor Lieberman of the far-right National Union party, has been a forceful opponent of what he calls the “legal tyranny” of the courts and state prosecutors, largely because of rulings upholding Arab rights.

Many Israeli jurists and legal experts are also alarmed about the appointment of the controversial Likud politician Tzahi Hanegbi as internal security minister, which puts him in charge of the national police. A former justice minister under Netanyahu, Hanegbi was implicated — though not indicted — in the so-called Bar-On affair of 1998. Netanyahu had been accused in the affair of trying to appoint an attorney general who could be expected to extricate a key ally, Shas leader Arye Deri, from a mountain of legal troubles. The appointment was scotched and several principals, including Hanegbi, were investigated by police for possible indictment.

Hanegbi is now in charge of the careers of the officers who investigated him, while the central figure in the 1998 affair, attorney Ronni Bar-On, now a freshman Likud Knesset member, was appointed this week to head the parliament’s influential Knesset affairs committee. His panel decides, among other things, whether to strip indicted parliamentarians of their immunity.

Both the Hanegbi and Bar-On appointments could prove pivotal for Sharon and his new political ally, Trade and Industry Minister Ehud Olmert. Olmert is considered to be Netanyahu’s rival for future leadership of the Likud. Sharon and Olmert are currently under police investigation for various allegations of corruption and other wrongdoing. Some analysts believe that the culmination of these investigations and the possible prosecution of Sharon or Olmert, more than any political or economic setback, is most likely to provide the setting for the new government’s first significant crisis.

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