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Category Archives: In Depth

April 3, 2012

Who will be Prime Minister Netanyahu’s future heir?

By Jonathan Hessen

Minister for strategic affairs, vice Prime Minister and former IDF Chief of General Staff Moshe Ya’alon announced that he intends to run for Likud chairman after the Benjamin Netanyahu era. The minister stresses that he will not run against Netanyahu as long as he heads the party. He hopes to land a better position in the next government, specifically that of defense minister. Ya’alon is one of many contenders for the role of Likud chairman, including Silvan Shalom, Gilad Erdan, Gideon Sa’ar and Yisrael Katz. They have all declared they will not run against Netanyahu, but it appears that the battle for the party’s future is already underway.

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March 14, 2012

The Iron Lady gets a makeover

By Eli Hazan

Margaret Thatcher governed Britain for 11 years. For much of this time, she was regarded by her political rivals as the worst and most reviled leader. Her decisive leadership style, especially her insistence on absolute capitalism, fuelled her detractors’ description of her as a monster. The singer Morrissey outdid the rest with the song on his first album entitled “Margaret on the Guillotine.”

During his eight-year reign, Ronald Reagan was also an unpopular leader, to put it mildly, at least for his political opponents. His jokes and winning sense of humor, however, helped dull the antagonism against him. His economic policies, which made life difficult for certain sectors of American society, was regarded as at least as bad as Thatcher’s, if not worse. In Western Europe, Reagan was regarded by the Left as a warmonger for his uncompromising stance toward the former Soviet Union. The continent’s collective memory reserves a special place for the crude demonstrations against him. Reagan completed his two terms as president as the winner of the Cold War, having brought the USSR to its knees.

Almost three decades have passed since these leaders held office and both have earned a late rehabilitation in the minds of the ideological offspring of their erstwhile rivals. For example, President Barack Obama is almost diametrically opposed to Reagan in his policies, but as soon as he announced he was running for president, he cited Reagan’s unique character in a favorable light. He is not the only one. Today Reagan is considered one of the most popular presidents in U.S. history. In a Gallup poll three years ago, Reagan came in first place, ahead of the late President John F. Kennedy and even ahead of George Washington.

In Israel, we have the example of former Prime Minister Menachem Begin, who is now remembered as Israel’s foremost champion of human rights. This would not be so interesting if it were not humans rights groups calling him that, groups that called him “Begin the murderer” during the first Lebanon War. You do not even need public opinion polls to bear witness to the nostalgic popularity Begin is subject to: all you need is to listen to the Israeli public.

In terms of Margaret Thatcher, a new film out in Britain that premiers in Israel this week, depicts “The Iron Lady” with a late-won sympathy. Actress Meryl Streep uses her unique talents to create almost total empathy for the character. The film corresponds to British polls in recent years showing that Thatcher has gained great popularity.

How can this image change be explained? In the face of contemporary leaders’ hesitancy in dealing with economic crises in Europe and America, the yearning for decisive leaders like Reagan and Thatcher is on the rise.

 

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November 29, 2011

The Bank of Israel reduces the interest rate for December 2011 by 0.25 percentage points to 2.75 percent

By Jonathan Hessen
Background conditions
Inflation data: The Consumer Price Index (CPI) increased 0.1 percent in October, in line with forecasts, and within the seasonal path consistent with achieving the inflation target. The rate of inflation over the past 12 months, as measured by the change in the CPI, continued to settle more firmly within the target range (1–3 percent per year) and is now 2.7 percent.
Inflation and interest rate forecasts: Inflation expectations, as calculated from the capital markets, remained at the same level as in the previous month at around 1.7 percent. With that, after publication of the October CPI, expectations rose slightly to 1.9 percent. Expectations for the medium and longer terms also remained steady at an average of 2.3 percent. Forecasters’ inflation predictions for the next twelve CPI readings were 2.3 percent on average, compared with 2.2 percent last month. Expectations of the Bank of Israel interest rate one year from now, based on the Telbor (Tel Aviv Inter-Bank Offered Rate) market, remained at 2.7 percent, while the average of forecasters’ predictions of the interest rate in one year’s time continued to decline, and reached 2.75 percent (compared with 3 percent last month). Most forecasters expect the Bank of Israel to cut the interest rate for December by 0.25 percentage points, and on average they expect the interest rate to be reduced by 0.38 percentage points over the next three months.
Real economic activity: Economic indicators that became available this month support the assessment that in the third quarter and in October the slowdown in the rate of growth of economic activity and of demand continued. With that, these figures are currently consistent with the Bank of Israel forecast of 4.7 percent growth in 2011. According to National Accounts figures for the third quarter (in annual terms), GDP grew 3.4 percent, similar to its growth rate in the previous quarter; business product grew 5.3 percent, compared with 2.7 percent in the previous quarter; private consumption increased by 0.9 percent, compared with 1.3 percent in the previous quarter, gross fixed capital formation increased by 17.8 percent, compared with 9.3 percent in the previous quarter; and exports declined 16.9 percent, compared with growth of 1.5 percent in the previous quarter. The Composite State of the Economy Index increased slightly in October, by 0.1 percent. The Bank of Israel’s Companies Survey and the new Central Bureau of Statistics survey of business trends showed that the slowdown in private sector business activity persisted and even intensified in October. In contrast, the Bank Hapoalim consumer confidence index increased in October, to a level of 50.7, the first time in three months that the figure has been above the 50 point level. Tax receipts in October were 8 percent lower than the forecast seasonal path, a continuation of the slowdown that began in April.
The labor market and wages: Labor market data indicate a high level of employment and a low unemployment rate. Based on trend data, the rate of unemployment declined by 0.1 percentage points in August, and reached 5.6 percent. The number of Israeli employee posts increased by 3.1 percent in June–August, in annual terms, compared with the corresponding period of 2010. The nominal wage rose in June–August by 0.3 percent, compared with the preceding three months, and the real wage increased 0.15 percent in June–August, compared with the preceding three months. Health tax receipts, which provide an indication of wage payments, were 8 percent higher in October (preliminary estimate) in nominal terms than in October 2010 (excluding the effect of legislative changes).
The Bank of Israel Research Department staff forecast: According to the Research Department staff forecast (from September), the rate of inflation over the four quarters ending in the third quarter of 2012 will be 2.3 percent, and the average interest rate in 2012 is expected to be 3 percent. The GDP growth forecast is 4.7 percent for 2011, and 3.2 percent for 2012. The assessment is based on, among other things, a lowered International Monetary Fund (IMF) forecast of global growth and world trade. Last month the Research Department examined the possible effect on Israel’s economy of a scenario in which global growth is 1 percentage point lower than the base scenario. If the lower growth scenario is realized, GDP growth in Israel is forecast to be about 0.5 percentage points lower in 2012 than in the base scenario. Inflation over the four quarters ending in the third quarter of 2012 is forecast to be 0.8 percentage points lower than in the base scenario, and the average interest rate for 2012 is expected to be 1 percentage point lower than in the base scenario.
Budget data: Government domestic revenues for the year to date through October were 2.7 percent lower than the seasonal path of the budget forecast, primarily due to a continued slowdown in indirect tax receipts, which began in April. The overall government deficit (excluding net credit) in the year to date was NIS 14 billion, compared to a deficit of NIS 16.3 billion in the corresponding period in 2010. Developments in government activity so far indicate that tax revenues will be about 2 percent lower than the budget forecast, and the budget deficit for the year 2011 will be around 0.5 percent of GDP above the deficit ceiling set by law—3 percent of GDP.
The foreign exchange market: From the previous monetary policy discussion held on October 23, through November 25, the shekel depreciated by about 3.8 percent against the dollar, in line with the general strengthening of the dollar world wide. The shekel was essentially unchanged against the euro (appreciation of 0.1 percent). The shekel weakened by about 2 percent in terms of the nominal effective exchange rate. The rate of participation by nonresident investors in foreign currency trading was 30 percent in November, compared with the average of 35 percent since the beginning of 2011.
The capital and money markets: From the previous monetary policy discussion held on October 23, through November 25, the Tel Aviv 25 Index declined by 8.3 percent, more than stock market indices in advanced economies unconnected with the debt crisis. The unindexed government bond market responded with declining rates for most maturities of up to 10 basis points (b.p.), while the yield curve of CPI-indexed government bonds declined sharply in short maturities, and increased by up to 15 b.p. for terms to maturity of over 4 years. The yield gap between Israeli 10-year government bonds and equivalent 10-year US Treasury securities widened to about 270 b.p., from 250 b.p. in the previous month. Makam yields increased slightly for maturities of up to 8 months, and declined slightly in longer terms. The yield for one year fell during the period from 2.8 percent to 2.7 percent—against the background of an exit from risk assets and expectations of continued interest rate cuts by the Bank of Israel, and despite the continued exit of nonresidents from makam. Withdrawals from mutual funds specializing in corporate bonds continued this month, although at a slower pace than that in the previous month. Israel’s sovereign risk premium as measured by the five-year CDS spread increased this month to 215 basis points from last month’s 160 basis points. The Tel-Bond 20 Index declined by 1.4 percent, and the Tel-Bond 40 Index declined by 2.1 percent.
The money supply: In the twelve months ending in October, the M1 monetary aggregate (cash held by the public and demand deposits) increased by 2 percent, and the M2 aggregate (M1 plus unindexed deposits of up to one year) increased by 14.1 percent.
Developments in the credit markets: The balance of outstanding debt of the business sector increased in September by 1.7 percent, to NIS 781 billion. Outstanding credit to households remained at NIS 359 billion in September, with an increase of 0.8 percent in outstanding housing credit, and a decrease of 1.8 percent in non-housing credit. Of the credit to households, outstanding housing credit rose 11.3 percent in the twelve months ending in September to NIS 257 billion, compared with a 10.9 percent increase in the twelve months to August. The volume of new housing credit granted in the twelve months ending in October was 2.2 percent lower than in the twelve months ending in September—a continuation of consecutive declines since the record high set in May. The share of unindexed floating rate mortgages extended in October was 26.6 percent, after reaching 26.1 percent in August. These percentages are significantly lower than the record levels of the first quarter of 2009—about 75 percent on average. The interest rates on CPI-indexed mortgages—both fixed rate and variable rate—increased in October, while interest rates on variable rate unindexed mortgages declined.
The housing market: Activity in the construction industry continues to be strong. The number of starts in the twelve months to August reached 43,672, and the number of completions was 33,605, both similar to the numbers in the previous month. The number of homes available for sale continued to increase, and in August–October was on average 8.3 percent higher than in the three preceding months (original data). The Central Bureau of Statistics Survey of Business Trends indicates a decline in activity and in new orders in the industry.
Housing prices reflected in the housing index, which is based mainly on renewed rental contracts and which is included in the CPI, declined 0.3 percent in October, but over the 12 months ending in October they increased by 6.3 percent—compared with an increase of 5.5 percent in the 12 months ending in September—and prices are expected, according to the Research Department forecast, to continue to increase at a similar pace in the coming year. Home prices, which are published in the Central Bureau of Statistics survey of home prices but are not included in the CPI, declined in August–September by 0.2 percent (the first decline since December 2008) after an increase of 0.6 percent in July–August. The annual rate of increase in home prices also moderated—in the 12 months ending in September the rate was 10.5 percent, compared with 12.1 percent in the 12 months ending in August, and this after levels of around 20 percent in 2010.
The moderation in home prices comes against the background of the continued increase in the number of building starts, the lagged effect of the increase in the interest rate, measures introduced by the Bank of Israel affecting mortgages, and steps taken by the Ministry of Finance in real estate taxation. The effect of these moves is expected to continue and be evident going forward.
The global economy: The debt crisis in Europe is deepening and spreading to additional countries. There is growing concern of a severe impact on the global economy. Austerity measures announced by several European countries have not succeeded, to date, to calm the markets. Yields on government bonds of Italy, Spain, and other countries in the eurozone have reached high and apparently unsustainable levels. The banking sector around the world, specifically in Europe, is under pressure due to its exposure to bonds of countries in difficulty, and in the event of a crisis would be liable to contribute significantly to the contagion effect, and to lead to the spread of the European crisis to other countries over and above the macroeconomic effects resulting from the contraction of world trade. Last month credit rating companies made further cuts in the rating of European countries, and warned of the credit rating outlook of other countries and of banks around the world. Macroeconomic figures published this month in the US were relatively favorable, and were generally better than expected, but they are still relatively weak. Data published in Europe were weaker, and many forecasters and investment houses expect that Europe will slip into a recession that is likely to deteriorate in light of the austerity measures announced in several countries. Inflation around the world is starting to moderate, and commodity prices that fell sharply are expected to reduce it further, but the increase in oil prices this year, that was out of line with the economic situation and with the fall in industrial metal prices, constitutes a burden on the already weak global economy. Against the background of these developments, the ECB made a surprise cut in the interest rate this month, and the markets are pricing in interest rate cuts in other economies.
The main considerations behind the decision
The decision to reduce the interest rate to 2.75 percent for December is consistent with the interest rate policy that is intended to entrench the inflation rate within the price stability target of 1–3 percent inflation a year over the next twelve months, and to support growth while maintaining financial stability. The path of the interest rate in the future depends on developments in the inflation environment, growth in Israel, the global economy, the monetary policies of major central banks, and developments in the exchange rate of the shekel.
  The debt crisis in Europe is becoming more severe and is spreading to other countries, and there is growing concern over its potentially strong impact on the global economy. Yields on government bonds of Italy, Spain, and other countries in the eurozone have reached high and apparently unsustainable levels. In light of the weak economic data published in Europe, the risk of Europe sliding into a recession and a significant slowdown in the global economy has risen. These negative developments are already affecting the Israeli economy, and their effect is expected to intensify.
  Economic indicators that became available this month support the assessment that in the third quarter and in October the slowdown in the rate of growth of economic activity continued. Most of the slowdown in the domestic economy resulted from the easing in global demand and its effect on exports, and also to some extent from the slackening of domestic demand.
  Inflation forecasts for the next twelve months as calculated from the capital market, those of the forecasters and that of the Bank of Israel are all close to the midpoint of the target inflation range. Actual inflation over the last twelve months is within the target range for the second month in succession, and is expected to remain there over the next year.
  The persistent negative trends in Europe led to a cut in the ECB interest rate and to cuts in interest rates in other countries, and resulted in the markets not pricing in an increase in the interest rate in the coming year in any of the major advanced economies. According to the announcement by the Federal Reserve, the interest rate in the US is expected to remain at its almost zero level till the middle of 2013 at least, and the Fed and the ECB are continuing with their quantitative easing measures.
  Home prices increased by 10.5 percent in the twelve months ending September, compared with 12.1 percent in the twelve months to August. In August–September home prices declined for the first time since December 2008. The continued increase in the number of building starts, the delayed effect of the increase in the interest rate, measures introduced by the Bank of Israel affecting mortgages, and steps taken by the Ministry of Finance in real estate taxation are all expected to continue to moderate home prices during the coming year. It should be noted that the limitation imposed by the Bank of Israel on the share of housing loans at variable interest rate reduces the effect of a cut in the interest rate on the average rate of interest on mortgages.
The reduction in the interest rate, together with the recent weakening of the effective exchange rate of the shekel, are expected to help Israel’s economy deal with the difficulties confronting it.
The Bank of Israel will continue to monitor developments in Israel’s economy and the global economy and in the financial markets. The Bank will use the tools available to it to achieve its objectives of price stability, the encouragement of employment and growth, and support for the stability of the financial system, including keeping a close watch on developments in the assets market, and especially in the housing market.
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December 19, 2010

Israeli-Palestinian Diplomatic Warfare

By IsraCast.com
President Mahmoud Abbas

Israel’s Prime Minister Binyamin Netanyahu and Palestinian Authority President Mahmoud Abbas show no signs of budging. U.S. envoys George Mitchell and Dennis Ross have returned to the Middle East in a new attempt to break the deadlock but Netanyahu rejects a new settlement moratorium while Abbas will not negotiate unless there is a new freeze. IsraCast analyst David Essing assesses the situation which has turned into a diplomatic war that Israel does not appear to be winning.

It’s back to square one, after the Obama administration failed to clobber and then coddle Israel’s Prime Minister Binyamin Netanyahu into another settlement freeze in Judea & Samaria (West Bank). Palestinian Authority President Mahmoud Abbas is adamant, he will not negotiate unless Netanyahu agrees to another settlement moratorium. The Israeli leader retorts that he already made a unilateral concession to the Palestinians with his 10 month freeze that expired on September 26th. However, Abbas squandered this moratorium by doing nothing and then had the temerity to dictate a precondition for negotiations – another settlement freeze. First Obama exerted considerable pressure on Netanyahu and when that didn’t do the trick he was reportedly ready to offer Israel a package of inducements that included another twenty- F-35 stealth fighter jets. But neither the stick or the carrots succeeded because the Israeli leader was committed to his supporters, in and out of government, to renew building in settlements. The outcome – the indefatigable U.S. envoy George Mitchell has revived his Middle East shuttle between Jerusalem, Ramallah and Arab capitals in another attempt to jump-start the moribund negotiations. His mission has been reinforced by the arrival of old Middle East hand Dennis Ross who has also been sent back out to his old not so happy ‘hunting ground’.

For his part, Netanyahu has resembled actor Eli Wallach in the western ‘The Good, the Bad & The Ugly’ and his memorable one liner: ‘ If you’re going to shoot, shoot!’ In his case, Netanyahu tells Abbas: ‘If you’re going to negotiate, negotiate!’ Abbas argues that renewed Israeli building proves Israel’s bad faith. The fact of the matter is that Israeli settlements have never been an obstacle to Israeli withdrawals. The iconic Likud PM Menachem Begin withdrew not only from settlements, an oil field and a major air base in Sinai in order to make peace with Egypt in 1979. That was for real peace that has endured to this very day. Then there was Arik Sharon, another Likud PM, who unilaterally evacuated all the Israeli settlements in the Gaza Strip in 2004. But that total withdrawal ended very badly with Hamas then exploiting the territory to launch thousands of rockets into Israel (also to this very day). Moreover, since the start of the Oslo process over seventeen years ago, the Palestinians have never set the prior condition of a settlement freeze (except for the Hamas Palestinians who have never deviated from their pledge to wipe Israel off the map).

Mahmoud Abbas, Benyamin Netanyahu, Barack Obama(Official White House Photo by Chuck Kennedy)

Ironically, it was Barack Obama’s insistence on the settlement freeze that threw a wrench into the works. Abbas has said that after Obama took such a resolute stand, he could do no less. But Obama failed to realize that Netanyahu had put all his credibility on the line by promising to rebuild after the ten month freeze and could not bow to American pressure or inducements to do so. And just what is the objective of the very negotiations now boycotted by President Abbas? No less than the terms of an Israeli withdrawal from most of the the West Bank and the establishment of the long awaited Palestinian state. What possible reason could Abbas have for refusing to sit down and settle the core issues of borders, security, refugees, Jerusalem and the finality of claims? One does not need to be a Sherlock Holmes in international relations to draw the conclusion, ‘however improbable it seems’, that Abbas is simply not interested in negotiating for a Palestinian state. The Palestinian leader apparently prefers to seek an imposed agreement foisted on Israel and the Palestinians by the UN. Its terms might be better, from a Palestinian point of view, and it would deflect the wrath of Hamastan in Gaza, whose Prime Minister Ismail Haniya has just reiterated: “The Palestinians will never, never, never recognize Israel!” Not that Abbas is willing to recognize Israel as the homeland of the Jewish people. In an interview in Arabic, Abbas explained it was important not to recognize Israel as a Jewish state because this would negate the Palestinian refugees ‘right of return’ to their former homes in Israel.

Meanwhile, Netanyahu is bearing the brunt of international criticism. A group of twenty-six former European Union senior officials have called on the EU to impose sanctions on Israel. In a stinging column in the New York Times, pundit Thomas Friedman wrote that both the Israeli and Palestinian leaderships were hallucinating and: “It is long past time that we stop being their crack dealers…it is manifestly in their own interests to negotiate a two-state solution”. However, the underlying reality is far more complex than reflected in Friedman’s catchy metaphors. There is a deep crisis of credibility existing between the two sides. The U.S.approach has focused on a Israeli map for future borders with the Palestinian state on the West Bank. The reasoning was that once there were agreed borders, both Israelis and Palestinians could build away inside their own territory. However, Netanyahu perceives borders as a function of security arrangements – in his view only security can bring lasting peace to Israel and not the other way around as some long distance advisers in the U.S. or Europe like to preach to Israel. In addition, Israeli sources talk of the need for simultaneous discussion on the whole range of core issues as described above.

So what will be a sensible and sober tack for Israel to take now – one not hallucinating on crack, but on the other hand is not driven by a dose of political Valium that ignores the considerable threats facing Israel if a peace agreement fails in the future? For example, what if Hamas overthrows President Abbas on the West Bank as well and again throws Abbas officials off the roofs of high – rise buildings as they did in Gaza? Should Israel not be as concerned about its security as those other democratic states that have been fighting their wars for years in in distant lands? The fact is that most Israelis, on the basis of past experience, do not believe that Abbas, even if he wants to, is strong enough to hammer out a deal with Israel and make it stick.

To negotiate with Israel, Abbas is dependent on the support of the Arab League and its follow-up committee which has now decided against fresh peace talks, if Israel does not halt the settlement building. Unless there is a break in the current logjam, Abbas is threatening to unilaterally declare Palestinian independence at the UN. Several South American states, including Brazil and Argentina, have already announced recognition of a Palestinian state and the move at the UN would probably be met with a landslide of support by other nations. In response, the U.S. House of Representatives has passed unanimously a resolution calling on the Obama administration: ‘To deny recognition to any unilaterally declared Palestinian state and veto any resolution by the U.N. Security Council to establish or recognize a Palestinian state outside of an agreement negotiated by the two parties’. The Congressional resolution is only declaratory as would be the Palestinian declaration of independence at the U.N. but the Palestinians will have won a major diplomatic victory in the international arena.

In Jerusalem, Foreign Minister Avigdor Lieberman poured cold water over the U.S. effort to seek an agreement within a year. In his view it would only create unrealistic expectations that would lead to a further deterioration of the situation. He told his Knesset faction: “The sole solution is a long-term interim agreement. All the previous attempts by Olmert at Annapolis and Barak at Camp David II only triggered a further worsening of the situation”. After meeting Mitchell in Jerusalem, Netanyahu said: ‘We have discussed practical ways to advance peace and achieve a framework agreement. This is Israel’s goal and I hope the Palestinians will respond to it”. However Abbas is now armed with the renewed support of the Arab League so if Israel refrains from some gesture, the peace process will likely remain stymied with the international tide turning against the Jewish state. Netanyahu has apparently weathered the storm with the U.S., but for how long? Israel’s leader should heed the words from the past by Arik Sharon, his Likud predecessor. In his day, Sharon warned the Palestinians were interested in ‘internationalizing the conflict’ and creating a situation where the Arab and Muslim pressure could be galvanized against the Jewish state. Sharon realized he had to prevent the creation of a diplomatic vacuum which others would fill with their ideas for resolving the conflict.

On this score, Likud cabinet minister Silvan Shalom has now stated unequivocally that the Palestinians are not really interested in negotiating the core issues and are exploiting the settlement dispute as a pretext. If this is so, are Israeli official actually playing into Palestinian hands by not presenting their own convincing peace proposals? Instead Israel is waging a war of counter-rhetoric, one it is losing because it is perceived as the stronger party which should be more forthcoming. Surely the goal of Israeli diplomacy should be to prevent the Palestinians from achieving their aim of casting Israel in the role of the side rejecting peace. Prime Minister’s Netanyahu’s statements without substance, coupled with Foreign Minister Lieberman’s outright rejection of a real peace agreement in the foreseeable future, are a prescription for a diplomatic debacle. This does not mean Israel’s leaders should hallucinate about ‘peace in our time’ with the Palestinians, any more than American leaders should about making peace with the Taliban or al Qaeda – but it does mean refraining from steps that are perceived as acting in bad faith and hampering the already fragile peace process. Israel’s leaders should understand the international community is not interested in the theoretical ‘rights and wrongs’ of the Israeli-Palestinian conflict but seeks a practical solution that gives the Palestinians a viable state and reasonable security to Israel.

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November 7, 2010

Obama And Netanyahu In Tests Of Leadership

By IsraCast.com

Barack Obama | Benyamin Netanyahu

The Israeli-Palestinian peace effort is still side-tracked after Israel’ ten month moratorium on settlement building expired on Sept.26th. After refusing to conduct talks with Israel during the freeze, Palestinian Authority President Mahmoud Abbas now demands the moratorium be further extended as a condition for returning to the table. Israel’s Prime Minister Binyamin Netanyahu has said he would stick to his ten month commitment, the Obama administration has urged Israel to extend the moratorium and the issue is likely to be at the top of the agenda when Netanyahu meets with Vice-President Joe Biden when they meet in the U.S. IsraCast analyst David Essing assesses the impact of President Barack Obama’s defeat in the U.S. mid-term elections and some of the implications for Prime Minister Netanyahu.

U.S. President Barack Obama and Israel’s Prime Minister Binyamin Netanyahu are both grappling with a fundamental issue – the leader’s role in a democratic society. Obama and his Democratic party have just been clobbered in the U.S. mid-term elections, while Netanyahu is still walking a tight-rope between American pressure for concessions to the Palestinians and securing his power base among Israeli Right-wingers. On entering the White House, Obama threw caution to the wind; he had seen the light and, like the biblical Moses, was the chosen leader destined to lead his people to the Promised Land of greater social equality. Nor was he deterred from his messianic mission by the pressing need to repair the collapsing economic system that had gone haywire under the Republicans’ unbridled capitalism.

Benyamin Netanyahu, Barack Obama (Official White House Photo by Pete Souza)

Obama would have done better if he had taken a page out of one of his illustrious Democratic predecessors, Franklin D. Roosevelt at the outset of World War II. British historian Ian Kershaw in his book ‘Fateful Choices’ described how Roosevelt was convinced the U.S. would have to confront Nazi Germany but also realized that he could not overturn the 80% of U.S. public opinion that supported isolationism and opposed getting embroiled again in another European bloodbath. So Roosevelt bowed to public opinion and chose to support British Prime Minister Winston Churchill with lend-lease etc., but even his role as a non-interventionist aroused the ire of the isolationists. Roosevelt had to bide his time until conditions changed which they did after Japan’s devastating surprise attack on Pearl Harbor. Roosevelt realized something that Obama did not – if a democratic leader gets too far out in front of the pack, no matter how convinced he is in the justice of his cause, he may lose the pack. In Obama’s case, he failed to understand there was a limit on the desire for change that had swept him into the White House. Obama now says the problem was that he was so busy with getting things done that he did not spend enough effort explaining his policies to the public.

In the Israeli context, Obama’s ‘go for broke’ approach recalls Prime Minister Ehud Barak’s ‘all or nothing gambit’ at Camp David 2000 with Yasser Arafat and Bill Clinton. Barak, with Clinton’s blessing, staked all his chips on a comprehensive agreement with the Palestinian leader. In that case, Arafat was not ready for peace; he simply walked away from the table and flew home to launch the Second Intifada. Subsequently, Barak had to face an angry Israeli public that included part of his Left-wing power base. He was blamed him for going too far, too fast, ‘giving away the kitchen-sink’ while all he had to show for it was a bloody wave of Palestinian terrorism. Both Barak and Obama were blinded by their own visions and ignored the underlying reality. Obama will get a second time at the plate before the Presidential election in another two years – the way things are going it is doubtful if the Labor Party leader will get a second chance in the Prime Minister’s office.

What can be said about Prime Minster Binyamin Netanyahu? Where has the Likud leader positioned himself in the choice between setting bold national goals in the face of changing circumstances or sticking to the platform that got him elected to office. Netanyahu appears to be wrestling with this fateful choice. Three Left-wing heavyweights Shimon Peres, Ehud Barak and now Yitzak Herzog, the young Laborite who is challenging Barak for party leadership, have all declared they believe Netanyahu when he says he is ready for the ‘painful concessions’ necessary to make peace with Palestinian Authority President Mahmoud Abbas. However, key Likud cabinet ministers such as Moshe Ya’alon, Benny Begin and Silvan Shalom contend that Netanyahu will honor his pledge to start rebuilding seriously in Judea & Samaria and doubt the PM’s commitment to the two-state solution.

The settlers are a little worried – they are running paid ads in newspapers quoting the Prime Minister’s promises to build again, as if Netanyahu needs reminding. Right-wingers are declaring: ‘We elected Netanyahu and he must do our bidding!’ There is a third course of action for an elected leader, the one coined by former PM Arik Sharon – ‘What a prime minister sees after taking office is not the same as what he sees before being elected’. Sharon raised this justification after being hauled over the coals by the Right-wing for bowing to President George Bush’s Roadmap for a two-state solution. However Sharon as did Yitzak Rabin stipulated that the reality of Israel’s security will always be paramount in Palestinian peace-making. The majority of Israelis believed them as evidenced by their election victories. For his part, Netanyahu defied the Right-wing and his own Likud party by enforcing the ten month moratorium on settlement building that expired on Sept.26th. He opted for the move in order to placate the Obama administration after the Israeli government’s building gaffe in eastern Jerusalem during the visit by Vice- President Joe Biden. The only reason Netanyahu was able to push through such an abhorrent step was his promise to send the bulldozers back in after the freeze expired. The PM had to reject American and Palestinian demands that he extend the moratorium if he was to save face with his domestic power base. The Arab League has given one month to find a solution and meanwhile Israel has refrained from wide scale building on the West Bank. So what happens now? If Peres, Barak and Herzog are right Netanyahu may possibly come up with a ‘constructive ambiguity’ when he sees Vice-President Joe Biden again, this time in the U.S. If so, Netanyahu will be declaring as did the late Yitzak Rabin: ‘I’m leader and I’ll do the navigating!’ Otherwise, Netanyahu will be opting for: ‘I’m their leader, so I have to do what my supporters want’.

The fact that Obama has stuck to his position, articulated in his Cairo address, that the ‘settlements must stop’ appears to leaves little room for Netanyahu to maneuver. But the question now being asked in Jerusalem is whether the battered Obama, about to be embroiled in a battle royal with a Republican majority in the House over economic policy will have the inclination to risk more of his political capital in the Middle East. Channel one TV has reported that Obama might replace envoy George Mitchell with old hands Martin Indyk or Dennis Ross. However, many Israeli pundits have said Obama will be preoccupied with economic issues at home, Two years ago during the presidential race they said the same thing and were proven wrong.

On the other hand, the grim IDF intelligence briefing by Gen. Amos Yadlin accentuated the reality of security threats to the Jewish state posed by a potential war on several fronts by multiple enemies. This reality was obviously made clear to the Prime Minister some time ago and undoubtedly stresses, as recently stated by President Peres, Israel’s need to assist the U.S. in building the coalition against Iran by advancing on the Palestinian peace track.

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October 8, 2010

Improved Security Situation Leads to Decrease in Number of Checkpoints in the West Bank

By Jonathan Hessen

Following the Palestinian initiated violence some 10 years ago, the IDF established checkpoints throughout the West Bank. These checkpoints were intended to stem the flow of weapons and terrorist activity which were rampant at the time. Checkpoints consist of a series of barriers at which passing individuals are screened and checked for weapons or weapons-making material, and are manned by IDF soldiers or Border Patrol soldiers. The presence of checkpoints has prevented countless terror attacks and has proven to save lives, revealing weapons such as explosive belts, mortars, grenades, bomb-making materials, guns, knives—many of them strapped on very young Palestinian children. The system of checkpoints was a major factor in the decline of violence and terrorist activity during the Second Intifada. During the Intifada period, many of the weapons uncovered at checkpoints were explosive devices, which were often found on a daily basis. Today, by contrast, knives are the primary weapons found by soldiers at checkpoints.

Due to a dramatic improvement in the security situation in the West Bank, the number of manned checkpoints has decreased from 41 in July 2008, to 14 as of October 2010.

The reasons for the improved security situation in recent years are threefold: First, IDF counter-terrorism operations in the Central Command enable the IDF to preemptively prevent terrorist attacks from being implemented against Israeli targets. Based on intelligence superiority and due to professional capabilities to carry out pinpoint missions, the IDF thwart terrorist efforts on a daily basis. Second, construction of the security fence impedes infiltration of terrorist factions into Israel. The security barrier is almost sixty percent complete and is a preventative physical barrier deeming infiltration to Israel formidable. Finally, the coordination and increased cooperation between the IDF and Palestinian Security Forces has resulted in greater regional stability. The coordination is based on a mutual interest and understanding that Hamas pose a threat to stability in the region.  Combined, these factors have resulted in a large economic growth in the West Bank. The reality from the process of the last two years outlined above has resulted in a decline in unemployment rate (3% decrease in the first quarter of 2010 compared to previous year), an increasing GDP rate (9% in the first half of 2010), and continued construction, especially in Nablus and Bethlehem for social, cultural and economic purposes (i.e. shopping malls, hotels, cinemas).
Note that there are no checkpoints in the entire Judea regional brigade (Hebron area), and that there are no checkpoints on the road from Bethlehem southward to Hebron.

* These numbers count fully manned checkpoints and do not include roadblocks, temporary barriers, or security crossings from the West Bank into Israel. In an earlier post, it was mentioned that two checkpoints have been added near Route 443 making the total number of checkpoints 16. This was not however accurate since the new security checkpoints are crossings into Israel and not within the West Bank.

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