SKOPJE, Macedonia, March 25 (UPI) -- Its leader seems more comfortable in battle fatigues than in civilian suits. He has been long pursuing a policy of military aggression and annexation. The regime is often castigated due to rampant human rights violations.
The country possesses weapons of mass destruction, although it repeatedly denies the allegations. It refuses to honor numerous U.N. Security Council resolutions. President George H.W. Bush once subjected it to sanctions. The United States has already trained its sights on this next target: Israel.
The chieftains of the New World Order have made it abundantly clear that Iraq's capitulation will be closely followed by the official release of a much-leaked "road map" for peace in the Middle East propounded by the Middle East Quartet: -- the United States, European Union, the United Nations and Russia.
A series of disclosures in the Israeli media made it equally evident that Prime Minister Ariel Sharon's crew beg to differ from substantial portions of the foursome's vision.
To demonstrate to skeptical and embittered Muslims everywhere that its motives in waging war on Iraq were more altruistic than ulterior, the U.S. administration will impose an even-handed peace on a reluctant Israel. Should it resist, the Jewish state will find itself subjected to the kind of treatment hitherto reserved for the founding members of the so-called "axis of evil" -- economic sanctions to the fore.
Can it withstand such treatment?
Institutional Investor has just downgraded Israel's 2002 country credit rating to 45th place -- seven rungs lower than in early 2000. It is ranked behind Kuwait, Cyprus, Qatar, and Oman.
Credit rating agencies Moody's, Fitch and Standard and Poor's have refrained from further rating action, following a series of downgrades in the past two years.
Israel's economy, especially its dynamic construction, tourism and agricultural sectors, has been weakened by three years of civil strife both within the green line and throughout the occupied territories. This has been reflected in the shekel's and the stock exchange's precipitous declines, by one fifth each.
Profits in the banking sector fell more than three quarters due to higher loan loss provisions.
The global recession and the bursting of the high-tech bubble have not helped. Gross domestic product growth in 2000 was a spectacular 7 percent. In the following two years, however, the economy contracted.
The calling up of reservists to active duty, the dwindling of immigration -- from 78,400 in 1999 to 31,491 three years later -- and the disappearance of the Palestinian shopper have depressed consumption, services and retail sales.
Uriel Lynn, chairman of the Israeli Chamber of Commerce, told BBC News Online, that the country has lost about $2.5 billion "in terms of business product." Defense spending spiked at 10 percent of the budget, double the American ratio and triple the military outlays of the typical EU member.
Social solidarity is fraying. The Histadrut (General Federation of Labor in Israel) -- run by members of the shriveled opposition Labor party -- declared a labor dispute on Sunday, heralding a general strike. This in response to reforms promulgated by the Ministry of Finance, now headed by a hardliner, the former prime minister Benjamin Netanyahu.
The private sector accounts for 70 percent of GDP in Israel and is stretched to the limit. Instead, the hard-pressed ministry wants to sack thousands in the bloated public services and cut the salaries and pension rights of the remaining civil servants by 8 percent. Government consumption amounts to one third of GDP and public debt exceeds it.
Reversing decades of tradition, collective wage agreements will be abolished. The Finance Ministry is trying to cut the spiraling budget deficit -- now pegged at more than 6 percent of GDP -- by $2 billion to about 3.5 percent to 4.5 percent of GDP, depending on one's propensity for optimism.
Netanyahu also pledged to lower the top marginal tax rate from a whopping 60 percent to 49 percent -- and privatize aggressively state holdings in firms such as El Al, Bezeq Telecommunications, Oil Refineries and Israel Electric Co.
He told the Israeli daily Ha'aretz that the fate of an American package comprising $1 billion in extra military aid and $9 billion in loan guarantees depends on such "proper economics."
Trying to balance fiscal profligacy, David Klein, the governor of the Bank of Israel, kept real interest rates high, cutting them by a mere 20 basis points on Monday to 8.7 percent.
Inflation last year alone, at 5.7 percent, was way above the 1998-2002 average of 3.7 percent.
Partly due to this contractionary bias, more than 50,000 small businesses shut down in 2002. According to CNN, another 60,000 will follow suit by year-end. The number of tourists plunged by a staggering three-fifths. Foreign investment crumbled from $11 billion in 2000 to $4 billion last year.
Unemployment is stubbornly stuck above 10 percent -- and double this figure in the Arab street. The State of the Economy Index, published by the central bank, fell for a 30th month in February. Of 1.6 million employees in the business sector, 61,000 have lost their jobs since January 2001.
Part 2 of this analysis will be published Wednesday. Send your comments to: [email protected].
