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The immediate effect of the latest round of violence that started yesterday on the Lebanese border is a big loss for stock market investors, as well as big drop in tourism in the Galilee at the height of the season.

It is possible that incoming tourism will also be affected.

But while they are painful results, they are only a small part of the grand scheme of things. The real trouble will start if this round of violence lasts for more than a few days.

News of the mobilization of reserve forces plus massive military action will result in continued losses in the stock market, and a rise in the riskiness of investment in Israel and lead to an outflow of foreign investment.

It is likely that Prime Minister Ehud Olmert, who is now struggling with the security of the people of Israel while simultaneously trying to prove himself as a leader, will take all of this into account.

Another possible result - and one no less worrying - will be the takeover of the national agenda by security issues and the abandoning of economic and social agendas.

Only a few months ago these issues were considered the hottest in the political arena. At the beginning of the second intifada we saw how intensive involvement in a violent security reality lead directly to a failure in economic policy.

The economy is still in the situation of enjoying the fruits of the economic policies of the last three years, and of the disengagement from Gaza, which brought about renewed economic growth.

But we can not live off the past for long. For the past few months no new economic acts or policies were made that will continue previous growth policies, or that create growth for future years.

In economics, as in business, standing still means moving backward.

Therefore, at the same time as managing the security situation in the north and in Gaza, there is a need to continue to guard the economic agenda, including reforms and a responsible budgetary policy.

Does anyone remember that only a few months ago the parties were talking about a cut in the defense budget?

This is the time to signal foreign investors that while Israel is fighting for the security of its citizens, it is still continuing the economic policies that have taken it so far in the past few years.