ישראל נאמן | Lectures, Articles, Tours: Israel | Mideast onTarget | Elliot Chodoff & Yisrael Ne'eman | Where Economics and Diplomacy Cross

Where Economics and Diplomacy Cross

27 March 2003

By Yisrael Ne’eman

Finance Minister Netanyahu’s economic reform passed a government vote by 21 – 2 surmounting its first hurdle.  Now comes the Knesset vote and the general strikes promised by the Histadrut Labor Union led by MK Amir Peretz, leader of the One Nation faction.  The Labor/Meretz left wing opposition have promised to join him, with all three claiming budget cuts be less drastic in social services with less effects on the lower classes.  The old/new mantra of the three left wing parties is the lack of progress on the diplomatic front with the Palestinians as the cause of Israel’s economic woes.  When pressed, they admit other reasons such as the world hi tech collapse in March 2000, 9/11, the war in Iraq and the need for economic restructuring cutting back on services and encouraging investment.

But they do have a point about ‘lack of progress on the diplomatic front’ and the Palestinian violence.  They are a trifle forgetful since the violence broke out in Sept. 2000 when Labor was in power.  The new ‘moderate’ Palestinian PM Abu Mazen was appointed this month, so until now almost all agreed Arafat turned out to be one of the great supporters of terrorism and not a partner in peace.  If Abu Mazen lives up to his promises, there will be what to negotiate.  He has met with Ariel Sharon and other Likud leaders.

Economics and diplomacy will now intersect in the Israeli political turmoil.  Everyone knows Netanyahu’s economic plan must pass in one form or another with an approximate 11 billion shekel budget cut, especially since the government is in debt 30 billion.  The opposition Zionist Left, Arab factions and ultra-orthodox parties will all vote against the plan and move to street protests but they know there is little choice.  At best they can pare back some of the cuts.

The government is fully aware quiet with the Palestinians will help rejuvenate the economy, especially tourism and investor confidence.  Sharon and those further to the right know Israel has no choice but to withdraw from the heavily populated areas of the West Bank (Judea and Samaria) and in the end remove settlements from those areas.  But they need an excuse and a demarcation line.

The new security fence is becoming a political border as it is to include Emmanuel (an ultra-orthodox town) and Ariel in the central Samarian hills, both quite a distance from Israel’s 1967 lines.  The contours of the fence are not just for defense and to keep out terrorists.  Most of central Judea and Samaria will be transferred to ‘moderate’ leaders such as Abu Mazen in the borderless Palestinian state to be established as part of the Bush ‘Road Map’ and an interim solution where terror is expected to be crushed and a permanent status agreement to be negotiated.

The government will use the economic excuse to make territorial concessions considered ideologically unpalatable to the Likud right (incl. Netanyahu himself) and which will force the hard line Right out of the coalition.  On the other hand, the Left, after having made its obligatory noises will acquiesce to the economic policy and Labor may join in their stead.

What appear to be conflicting tactical moves are serving an agreed upon double strategic purpose in revamping the economy and ending the conflict with the Palestinians.