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The Ministerial Committee for Legislation yesterday approved a series of economic benefits for Jerusalem residents in an effort to roust the capital out of its dire socioeconomic state.

The proposed legislation, conceived by 40 MKs from opposition party Kadima and the far-right National Union, is designed to entice young Israelis on solid financial footing to take up residence in the city. It calls on the state to declare Jerusalem a national priority area, making it eligible for financial breaks. It also seeks to give people incentives to buy real estate.

In recent years, young and educated Israelis have been leaving the city in increasing numbers - people considered crucial to the area's economic and cultural development.

One potential sticking point is that the proposed measures do not distinguish between the eastern and western halves of the capital. Should the legislation be voted into law, it would likely provide incentives to purchase property in areas whose political status is subject to dispute, particularly in the city's eastern and northern sections.

MK Ahmed Tibi (United Arab List-Ta'al ) said the latest proposal is further proof that the Israeli government does not seek peace with the Palestinians.

"The entire world needs to be become aware of the fact that this is a government of settlements and annexation, one that is throwing sand in the eyes of the international community," he said. "There is no chance for any agreement with such a government. East Jerusalem lies at the heart of the occupied territories, and this decision entrenches the occupation."

Meretz chief Haim Oron decried the "unnecessary decision and its awful timing."

"The way to cope with Jerusalem's weak socioeconomic status is not by Judaizing the eastern part of the city and making a destructive announcement," Oron said.

Communications Minister Moshe Kahlon said the committee's decision, which garnered support from the government, represents "a clear, unequivocal political message that Jerusalem will not be divided and that [the government] is in no way prepared to discuss its partition."

"Anyone among the Palestinians or anywhere in the world who expects the current Israeli government to recognize any claims of sovereignty in the capital that are not Israeli is mistaken and is misleading others."

MK Nachman Shai (Kadima ), one of the proposed legislation's co-sponsors, rejected any suggestions that the bill is designed to strengthen Israeli settlement activity in East Jerusalem. Shai said he did not expect a crisis with the Palestinian leadership or Washington if the bill passes.

"Israeli governments have historically neglected Jerusalem, and have done so in a criminal manner," Shai said. "Nowhere in the world is there a capital that is also the country's poorest city .... This is not a case of building in the eastern part of the city."

He said "the problem today is that Israel's capital is not a Zionist city. It is a city that is becoming more ultra-Orthodox. We need to pour in a lot of money and build infrastructure projects to bring it up to par."

Officials in the Jerusalem municipality expressed satisfaction at the ministerial committee's decision.

"Formal recognition from the Knesset and the government of the need to strengthen Jerusalem is critical for the city's future and for the continued positive momentum in the city," Mayor Nir Barkat said. "The decision will help make Jerusalem an attractive place for young people, tourists and investors."