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One of the toughest tasks faced by an economics reporter is trying to disclose the share of the state budget that goes to the settlers. It is difficult because each ministry has its own accounting methods, and the treasury's budget division does not take the trouble to add up the immense sums that go to make life easier for the pioneers.

An example of this is a decision reached by the Rabin government after the signing of the Oslo accords: the transfer through the Interior Ministry of several tens of millions of shekels each year to the settlements, as "defense grants."

While Eli Yishai was interior minister there was no problem, with NIS 66 million being transferred each year, quickly and efficiently. But in 2003 Avraham Poraz became interior minister. He was not at all pleased with his ministry serving as a pipeline for additional funding of the settlements, whose situation is much better than the Israeli average. So Poraz decided to transfer only two-thirds of the sum to the settlements, and allocated the remainder to more important activities within the Green Line.

Although the blood of the residents of Sderot is not as red as that of the residents of Ariel, he went ahead and did it. Benjamin Netanyahu was angry and battled Poraz with all his might, but he was eventually forced to give in.

This year, Poraz decided to go a step further - he informed Netanyahu that he would be transferring only half of the amount to settlements.

Netanyahu, who cannot transfer the funds directly from the Finance Ministry, was forced to agree, and thus, the Knesset voted this week on the allocation of NIS 42 million: NIS 21 million to the territories and NIS 21 million to struggling local authorities inside the Green Line.

This small example shows how important the settlers are to Netanyahu and how far he is willing to go for them. It fits in well both with his worldview and with his doctrine of reaching his objective by stages. Stage 1: Conquest of the Likud central committee and the members of the party. These are right-wingers and settlers opposed to every concession, which is why Netanyahu was opposed to disengagement and positioned himself on the right side of the Likud.

In Stage 2, he aspires to win the sympathies of the entire right, which essentially does not have a lot of choices right now: either Netanyahu or Sharon, and the choice is clear.

The third stage will commence on election eve. Netanyahu knows that most of the people want negotiations that will lead to a peace requiring the evacuation of settlements and significant concessions in the territories. Which is why we will suddenly hear him talking two months before the election about "observing agreements," "commitment to the disengagement plan" and "peace and security." And how do I know that this Stage 3 will no doubt come? Because this is exactly how he worked in '96.

Throughout that election campaign, he presented the real Netanyahu: extreme right. He opposed any negotiations and voted against the Oslo Accords, summoning up all of his rhetorical skills in the process: "The accords will bring hundreds of thousands of refugees from all over the Palestinian diaspora to Gaza and Nablus, from which they will threaten Netanya and Jaffa." Heavens preserve us.

But two months before the election, he began to say that he "observes agreements and would therefore observe the Oslo Accords," that he would continue the peace process and, if need be, would even talk with Arafat. The Israeli people, which yearns so for an end to the violent conflict, took the bluff at face value - and Netanyahu won the election.

The moment he sank into the prime minister's armchair he resumed his real stance: He opened the Western Wall tunnel, he set the territories afire once more, he brought Israel back into the maelstrom of daily reports by the international media networks, he expanded settlements, and he buried the Oslo Accords. The end result was a return to war, deaths and casualties, and an economic setback: decline in growth and increase in unemployment.

Now, even the tiniest buds of a chance for resumption of negotiations with the Palestinians are all it takes for the stock market to soar. That is sufficient to spread waves of optimism through every sector of the economy, with new projections of rapid growth. The economy is in such a state of longing for a political solution that it clings to the slightest prospect.

It is increasingly clear that rapid growth and a drop in unemployment will not be generated by the budget and the reforms (which are important in their own right), but from the diplomatic horizons.