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1. A new Middle East

The Israeli government is vying with the American administration in its eagerness to see the war plan put into action. And if President Bush seems to be acting out of a sense of religious mission - as if God has charged him with the task of uprooting the axis of evil, starting with Saddam Hussein - Ariel Sharon is awaiting the American operation in the desperate hope that salvation will follow in its wake.

Sharon isn't alone; the entire ruling establishment - the political echelon and the senior echelon of the public sector, the top military and intelligence officials, business leaders and the politicians who are trying to put together a coalition - all are waiting for the war in the expectation that it will bring about a yearned-for turning point in the country's grim situation. One could say that Israel is looking for Ares, the ancient Greek god of war, to play the part of the deus ex machina in this drama. An almost pagan faith has been placed in the potential blessings of the American war on Iraq.

An assessment made by the IDF and the intelligence community predicts that the defeat of Saddam Hussein (the presumed outcome of the American action) will send shock waves through the region that will lead to big changes in the neighboring countries. According to this forecast, the entire world - and the Arab world in particular - will be affected by the determination displayed by the U.S. in its struggle against the tyrant from Baghdad, and will learn certain lessons. Arab rulers, including Bashar Assad, Sheikh Nasrallah and Yasser Arafat, will understand that the U.S. will no longer tolerate their involvement in terrorist activity. And, as a result, their approach to Israel could change.

The main hope in Israel is that Saddam's removal from Baghdad will hasten the processes of change taking place within the Palestinian leadership, which the intelligence services and the political echelon say are already discernible. The belief is that disgruntlement with Arafat and the realization that he has brought disaster to the Palestinian people will gain momentum and be translated into a process that leads to his neutralization. The assessment is that an alternative leadership - composed of Abu Ala, Abu Mazen, Salem Fayad and Mohammed Dahlan - has already coalesced. This group is ready to take on the leadership of the Palestinian Authority (and ostensibly has already agreed on a division of roles), but it will not come forward as long as Arafat refuses to step aside.

Although there doesn't appear to be any Palestinian Brutus ready to do away with Arafat, the hope in Israel is that after the war in Iraq, circumstances will be created that will make it possible to remove him from a position of influence. The prevailing feeling in Jerusalem is that the leaders of Egypt and Jordan, as well as the leaders of the European countries that have been involved in trying to resolve the Israeli-Palestinian conflict, share this vision. President Bush gave the nod to this process long ago.

Another hope is that the war will nudge Israel out of economic recession. In Jerusalem, they believe it will recharge the West's economy and create new opportunities for the Israeli economy. With war as the backdrop, it will be easier for Israel to receive American aid and loan guarantees, since it will certainly be included in the list of countries (like Turkey) that U.S. Congress will seek to compensate for special expenses caused by the war.

The coalition negotiations could also be affected by the war. Sharon is timing his moves so that there is an overlap between the forming of the government and developments on the Iraqi front. He anticipates the war will create circumstances or alter outlooks in a way that will increase his bargaining power versus the other parties and their leaders. Even if Israel is not directly affected by the battles, the campaign in Iraq could still change the political and security situations.

Accepting that an event on the magnitude of an American assault on Iraq could upset the status quo and bring major changes in its wake, it's still hard to shake the feeling that what the fervency of Israeli expectations regarding the war really attests to is despair. The dependence of the country's leadership on the power of an extreme and violent external force of this kind only attests to the total bankruptcy of its ability to manage its affairs in the normal way.

Sharon is incapable of dealing directly with the tremendous burden that the conflict with the Palestinians is placing on the country; he cannot extricate the country from the severe economic crisis; he has not found any way to improve the hostile relations between Israel and its neighbors to the north; and he is having a hard time forming a coalition to his liking. Sharon is pinning his hopes on a foreign power, on external developments, on war - which by its nature is a monstrous event. This is a wretched reflection on him and all the ministers, officials and officers he purports to lead.

2. The swinging pendulum

Starting next week, the drumbeats of war between the United States and Iraq will grow increasingly louder. The Israeli public will hear them in the messages coming from the defense establishment and in the raised level of alert. Sometime within the next two to three weeks, the country will enter an emergency situation, even if there is no immediate official declaration of it. Once the American assault commences, Israel will enter a new state of preparedness, the agenda will change and a more acute level of tension will envelop the public and impact its mood and behavior. The greatest anxiety will be over the chance of missiles, perhaps armed with nonconventional warheads, landing here.

Every responsible regime must prepare for such a possibility, and this government has certainly given it much thought. The real test, though, is in the type of preparations made and how they hold up at the moment of truth - if it should arrive. When pre-school teachers are showing their charges gas masks and explaining what they are, one may ask if this the correct type of preparation. When mayors and council heads distribute letters to local residents informing them that alternative lodgings have been arranged in case of a missile attack, one can wonder about the type of preparations. And when the public is told that space in certain parks has been designated for the temporary burial of mass casualties, then the question is even greater.

These criticisms are pertinent because it appears that the various kinds of self-defense initiatives being taken do not always derive directly from instructions from the government or the Home Front Command. For example, the efforts by local council heads to move out a large number of residents in an organized way are obviously influenced by their desire to demonstrate concern for their constituents on the eve of municipal elections. The decision to expose pre-schoolers to gas masks and the dangers they imply came from the Education Ministry, with the approval of the Home Front Command; the teachers were instructed not to put the masks on the children, but only to show the equipment to them so they would not be completely unfamiliar with it.

The problem is that ever since a war between the U.S. and Iraq became a real possibility, the messages that the government has been sending the public have veered all over the place: From discussions about inoculating the entire population against smallpox (a proposal that was eventually rejected) to the reassuring statements by the defense minister and chief of staff that the danger of missiles armed with nonconventional warheads falling on Israel is minute; from the focus on defending the home front from missiles or aerial bombings by Iraqi planes to the more recent assertion that the main danger lies in terror attacks that could be carried out against Jewish and Israeli targets abroad. In a situation of uncertainty, the pendulum swings between outright panic and hysterical calm.

3. Breaking the vicious circle

At a Finance Ministry meeting this week, someone remarked that at the start of this winter, the weather forecasters predicted a drier than average season and that the abundance of rainfall since then just goes to show it's not so easy to predict the future. The same holds true when it comes to the economy, some argued - in other words, one shouldn't complain to Finance Ministry economists about incorrect estimates that were included in their calculations upon which the annual budget was based.

After the meeting, one ministry official remarked that even if Albert Einstein or Alan Greenspan were in charge of running the Israeli economy at this time, without any change in the political-security situation, neither would have found a good way to resolve the severe economic crisis. All of these comments were meant to deflect criticism of the performance of the ministry's professional echelon. It has been accused of presenting a budget based on unsubstantiated forecasts and of accounting manipulations that created a false picture of the state of the economy, which was revealed this month when the real extent of the decrease in income from taxes became apparent.

In their attempt to repair their damaged prestige, Finance Ministry officials claim that the objective situation of the Israeli economy in the present circumstances is so bad that no expert would be able to do much about it. The problems are well known: A security crisis that causes a sharp increase in expenses and a drastic decrease in income and investments; political instability that precludes an orderly decision-making process; a general decline in the West's economy; and a hard-hit high-tech industry. The cumulative effect of all these factors is the deep recession and a vicious circle that can't be broken.

Top officials at the Finance Ministry are holding urgent meetings. The atmosphere is filled with anxiety over what may lie ahead. There is genuine apprehension about the stability of the economy. There is talk of a real financial crisis. Sharon appears to be very concerned about the severity of the recession. Aware of the seriousness of the volatile economic situation, he seems to be concentrating his efforts on keeping the danger at bay.

A year ago, former finance minister Avraham Beiga Shochat predicted it would be the economic situation that caused Sharon to alter his approach to the conflict with the Palestinians, and in recent weeks, this scenario has indeed been materializing. While the current military approach to dealing with terror could be extended for many more months, the economic problems now facing the country require quick decisions. The need is so pressing that leading treasury officials are imploring Sharon to make some decisions now, even before the government is formed, arguing that since he will be heading the government anyway, he will be able to confront his coalition partners with previously determined facts. The decisions to be proposed by the Finance Ministry include a deep cut in the budget (up to NIS 15 billion), organizational and administrative reforms in the structure of the government and its work, the transfer of funds to areas that encourage growth and employment, lowering taxes (speeding up certain stages of the tax reform so that the public will have more cash available to use for consumption) and use of the American aid package. This drug cocktail is supposed to be the key to getting out of the vicious circle that keeps perpetuating and deepening the recession.

But even if Sharon and Finance Minister Silvan Shalom follow their recommendations to make some big decisions in the coming days, before the formation of the government is complete, the treasury economists emphasize that without a major change in the security and diplomatic situations, the economy will remain in the dumps. In so doing, the professional echelon places responsibility for the bleak situation on the political echelon.