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Most of the Jewish National Fund's leadership is against a law that would allow it to continue leasing land only to Jews, deputy JNF chairman Menachem Leibovitz told Haaretz yesterday.

"We want to reach an arrangement with the state within three months and there is no reason, no justification and no wisdom in enacting a JNF law. I imagine that is the position of most of the JNF leadership," he said.

The proposed bill calls for a comprehensive land swap with the Israel Lands Administration. Under the deal, the JNF would give the ILA land slated for construction in urban centers, in exchange for rural territory.

Leibovitz said he believed the bill in question, which would allow the JNF to continue leasing land only to Jews, would be "harmful to the Jewish people." Yesterday during the Knesset Economics Committee's first discussion of the bill, JNF legal advisor Meir Alfeia announced unexpectedly that he did not believe he had to tell the committee the JNF's position on the bill.

Sixty-four lawmakers supported the bill in its preliminary reading.

Leibovitz also told Haaretz yesterday that at the last meeting, the JNF's board of directors had decided to work toward an arrangement to give the state its lands in urban centers. The JNF would receive available rural lands in exchange.

Attorney General Menachem Mazuz supports this arrangement as a means of solving the crisis over JNF lands.

Aliza Ken of the Justice Ministry told the committee yesterday that Mazuz believes the law does severe damage to the cause of equality and even human dignity and will make wrongful discrimination legal. She added that Mazuz said the Israel Lands Authority "has to maintain the principle of equality and could not discriminate based on ethnicity in its actions as manager of JNF lands."

Under the previous policy, in cases when a non-Jewish individual won a tender for JNF lands, the organization would transfer the lot to the ILA and receive alternate land in exchange. Mazuz opposes continuing this policy and supports a comprehensive exchange of lands.

Balad Chairman Jamal Zahalka told the Economics Committee yesterday, "You are discriminating against Arabs in the name of Judaism. Shame on you. There is another Judaism."

MK Gilad Erdan (Likud) said the real question was "whether the State of Israel had ended its function. Those who support this law believe that the struggle for the Jewish identity of Israel is not over."