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The miserable show Finance Minister Benjamin Netanyahu put on Tuesday night, debating Histadrut labor federation leader Amir Peretz, was just another sign of how fast the former has been losing height.

Just a month ago, Netanyahu was barreling onward and upward. Even though the economic program he's spearheading promises much pain ahead of the cure, he managed to win the approbation of much of the business sector and general public.

Yet in the last couple of weeks, more and more people are souring on his economic program. He, personally, has been taking blows from all directions, while labor leader Peretz is the one standing tall.

What happened to Netanyahu? How did his PR magic lose its touch in the space of a month? Did the mud that Peretz flung do the trick? Or was it the prime minister's fault for failing to provide adequate backing for the economic decrees? Or perhaps the economic program itself proved unconvincing

Nope, what killed Bibi's momentum was the shekel - our currency.

The shekel, you gasp. But it has strengthened by 5 percent since Netanyahu took over the Finance Ministry. Yesterday it surged to NIS 4.638 to the dollar - its highest level for five months. What more could a finance minister want, especially since it was precisely the depreciation of the shekel back in June 2002 that almost unseated his predecessor, Silvan Shalom?

No, don't extrapolate from one event to the other. This time around, the shekel's appreciation does the finance minister no favors, and it doesn't help his economic program either.

The shekel-dollar exchange rate is the yardstick that most influences economic opinion right now. Rapid devaluation creates tremendous pressure among the public and business sector, while appreciation relieves the pressure.

Netanyahu came to the Finance Ministry after years of economic decline, during which most of the marketplace came to fully grasp the true fragility and gravity of the situation. Everybody knew we were racing for the abyss, and this is why Netanyahu's brutal program won so much support - at first.

But the very credit the markets gave Netanyahu and his program concealed the seeds of his downfall.

The market sentiment reversed; the shekel started to regain lost ground; share prices soared; and, most important of all, the interest rates at which the government raises capital started to sink - and fast too.

Then came the guarantees. The day war broke out in Iraq, Washington announced it would guarantee $9 billion in loans for the Israeli government. The moment Israelis began to unwrap their gas masks was the moment the economic all-clear started to sound. Armed with guarantees and an economic program, the risk of economic crisis seemed to fade away.

As if the credit for the economic plan and guarantees wasn't bad enough, the Americans cut through Iraq like a hot knife through butter, leading pundits to surmise that the risk factor of the Middle East has declined. Israel's security situation, therefore, could improve somewhat in the year to come.

Interest rates are falling; stocks are rising; and the risk premium of the whole region is dropping. In short, the guillotine that had been fast approaching the neck of Israel's economy has reversed direction. And if its approach sharpened the minds, its retreat is dulling them anew.

Suddenly people started to question whether we really need that brutal economic program. Why couldn't the government's deficit be increased actually? Why couldn't Israel inflate its external debt just a bit more, allowing its public sector to keep growing? Why not continue to pass elephantine sums from the state budget to interest and transfer payments? From whence all the fuss about crisis?

The upshot is that with America's guarantees en route, and its presence felt in the Middle East, the chances of Netanyahu pushing his program through are smaller.

That's the way things work in Israel. Nothing ever happens until the crisis arrives. Courageous decisions are not made without the stench of fear. Decked out in American shoes, the Israeli economy will keep meandering along its destructive path for a while longer, until the guillotine's edge comes down again, and we all come to our senses.