The treasury is preparing a revolutionary new plan to privatize state-owned banks by giving every adult Israeli an option to buy shares at half-price. Similar proposals were floated twice before, in 1986 and 1995, but nothing came of them.

In the plan Accountant General Yaron Zelekha is preparing, every Israeli aged over 18 would have an option to buy shares in Bank Leumi and Israel Discount Bank. The options themselves would be free, and they could be exercised at a price equal to 50 percent of the stock's traded value on Tel Aviv Stock Exchange.

This effectively means the government would sell the banks for half their present value - and since the government's shares in Leumi and Discount are worth around NIS 6 billion, it would be giving the public a gift worth NIS 3 billion. In individual terms, each of the country's 4.4 million adults would get options worth about NIS 1,360, of which NIS 680 would be a gift.

Zelekha presented the plan to Benjamin Netanyahu in March 2003 just after he became finance minister. Netanyahu approved the idea in principle, and when he named Zelekha as the new accountant general two months ago, Zelekha immediately began to pushing the scheme again.

Zelekha has hired David Brodet, a former treasury budgets director who headed a public commission that recommended a similar idea in 1995, to examine the issue thoroughly and prepare a comprehensive plan for immediate implementation within two months.

The treasury's interest comes from its conclusion that there is no chance of selling a controlling stake in either bank to local or foreign investors. This is because of the huge sums the deal would require - hundreds of millions of dollars - and because of Israel's poor economic state.

Also, the fact that previous privatizations like Bezeq and El Al were halted in midstream led international investors to lose faith in the government. They are now reluctant to buy shares in state enterprises, fearing the government might later renege on selling off the rest of the shares. This would leave them stuck with a state partner whose political interests and hirings would leave them unable to run the company as a free business.

It was precisely this fate British Cable & Wireless suffered. It initially bought a sizable stake in Bezeq with the eventual aim of bidding for control of the telecommunications giant but, when privatization ground to a halt, the Britons quickly unload their shares.

The "options plan" eliminates this danger by transferring state control of the banks to the public in one fell swoop, making it impossible for the government to get cold feet halfway through.

Once the options are distributed, they would immediately be registered for trade on the TASE, enabling businessmen interested in vying for control of the banks to start buying them. Several investors, who might each buy no more than 3 or 4 percent of a given bank, could then band together to form a controlling interest, if the Bank of Israel approved.

The treasury believes this tactic would result in a controlling stake being formed for both banks relatively quickly, ending 20 years of state ownership and enabling the banks to be run more efficiently.

In addition, the process would revitalize the stock market and give ordinary citizens additional disposable income, encouraging them to spend more and hopefully jump-start the economy. The treasury predicts the plan could increase Israel's gross domestic product by 0.3-0.4 percentage points.