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The crisis in European markets is expected to lead to a $1 billion drop in Israeli exports to the continent, according to research by the Industry, Trade and Labor Ministry. And that is an optimistic figure, said Benny Fefferman, head of the ministry's planning and economy division.

"Assuming that the crisis does not expand beyond the PIIGS nations [Portugal, Italy, Ireland, Greece and Spain], and that the damage to Israeli exports, in the worst-case scenario, is at a level of one third of total present exports to [those countries], then the total damage would be in the $1 billion range - 2% of total Israeli exports in 2009," the report stated.

If the crisis expands beyond the PIIGS nations, however, the damage could be much worse.

Ministry economists noted that for now, the crisis is still limited, both in the harm it is doing to exports and in terms of direct exposure by Israeli financial institutions.

Nevertheless, the ministry recommends finding alternative markets in Asia and emerging nations. Ministry economists also recommend looking at other steps to keep exchange rates under control, in addition to the Bank of Israel's ongoing purchase of dollars.

Exports fell in April

Israel's industrial exports to the European Union have already fallen, by 5.7% in March, to $965 million. And total exports of goods dropped again in April, by about 8%, the Central Bureau of Statistics announced yesterday.

Total exports reached $3.4 billion last month, down from $3.7 billion in March, the bureau said, and high-tech exports were down particularly sharply.

Euro still falling: Down to NIS 4.67

The euro tumbled more than 4% against the dollar last week, to an 18-month low of around $1.235.

While there was no official forex trading in Israel yesterday and no representative rate was set by the Bank of Israel, options trading on the euro reflected another drop of almost 1% in the European currency against the shekel, down to less than NIS 4.67. The representative rate was set at NIS 4.713 on Friday, but the euro continued to fall in later trading.

Last week, the euro fell 5.7% against the shekel, and it is down 14% against the Israeli currency since the start of the year.

In contrast, yesterday's options trading reflected an almost 0.5% rise in the dollar, to NIS 3.78. The representative rate was set at NIS 3.759 on Friday.