TEL-AVIV – Israel faces a very deep and dangerous economic crisis. 2002 was the worst year Israel has had since the first few years of austerity after the war of Independence (1949-53). The annual rate of inflation and consumer price index hikes reached 6.5 percent, up from one to two percent over the previous few years. Unemployment at the end of 2002 stood, according to official figures, at 10.4 percent of the civil workforce. Long-term unemployment is at almost 14 percent.

Twenty months ago, when Prime Minister Ariel Sharon and his Likud crowd took over, unemployment stood at 6.3 percent.

For the first time since the State of Israel’s birth, the gross national production has dropped compared with the previous year. The exchange rate of the Israeli New-Shekel (NIS) has lost more than 15 percent of its U.S. dollar and euro values.

The gap between rich and poor has drastically widened. During 2002, almost a third of the Israeli population lived below the poverty line; 22 percent of children below the age of 14 suffer from grave malnutrition and go to bed hungry. Especially hard hit is the one million Arab-Palestinian Israeli citizens.

Many business and financial experts, as well as popular opinion, reject Sharon and his treasurer Silwan Shalom excuses, which put the blame for the economic and social misery completely upon the world-wide economic recession.

Yet, the truth is really much more than meets the eye.

The Finance Ministry, as well as the president of the Bank of Israel, said that the 2003 budget, adopted by the parliamentary majority in the Knesset before the house’s dissolution in December, was not realistic from the outset. It will have to be grossly amended immediately after the convening of the newly elected Knesset.

Drastic cuts, to the extent of many billions, from social services, will have to be introduced, in order to ease the tremendously growing debt burden and growing military “security” expenditures.

Economic experts offered no hope and said the crisis would deteriorate into an abyss.

The correlation between the economic misery and the futile attempt to continue the war against Palestinians by re-occupying their cities and countryside, with gross violations of human rights and war crimes, becomes increasingly obvious.

These ties often find expression in the media. The press recently quoted U.S. Professor Stanley Fisher, introduced as “a friend of Israel,” who said, “There is no military solution to the continuing bloodshed. Renewing the peace process is of enormous importance. Only ending the state of war and renewing the dialogue with the Palestinians will turn the Israeli economy around …”

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