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It is not clear whether the Sharm el-Sheikh summit actually accomplished anything. True, Ehud Olmert spoke eloquently about his desire for peace and his commitment to resolving the conflict with the Palestinians, but we have all had our fill of speeches and promises. On the other hand, Olmert returned from the United States a few days ago with something tangible in hand - a $600 million addition to the defense budget. When the two met privately, President George W. Bush promised to increase the U.S. defense grant to $3 billion a year beginning in 2009.

Olmert takes credit for this, of course. He believes it is related to his warm relationship with Bush. But the truth is that, with or without Olmert, Bush is a staunch supporter of Israel. He regards Israel as a stable island of democracy in a sea of Arab dictatorships and a rescue team that will always be beside him in his global war on Islamic fundamentalism.

In this private tete-a-tete, Olmert told Bush about Israel's defense problems, which are far from simple. It turns out that since October 2000, the outbreak of the second intifada, the defense situation has changed in a very fundamental way. Israel is fighting simultaneously on four fronts, and the financial burden is unbearable. Since the intifada, the outlay on the Palestinian conflict has risen steeply. There is always something else: In 2001-2003, the GNP dropped sharply generating losses of 50 billion shekels; then came the construction of the wall, then special operations like Defensive Shield, then disengagement from Gaza, with total costs reaching NIS 10 billion.

The conflict with the Palestinians has pushed Israel into an insane arms race in which the country is forking out mind-boggling sums while the Palestinians spend almost nothing.

Consider the tunnels. The Palestinians dig them with shovels, and Israel invests a fortune in electronic systems to track them down. Consider the Qassams. The Palestinians launch crude metal pipes filled with explosives using a simple firing mechanism, which sets them back $300 a Qassam, while Israel develops a super sophisticated anti-missile system to shoot down these flying pipes at the cost of $100,000 per Qassam. Add to that the cost of upgrading shelters in Sderot and the settlements around Gaza. Need another example? In order to keep out suicide bombers, Israel has spent the gargantuan sum of NIS 13 billion to build a security fence around the West Bank.

And all this is nothing compared to the sums spent on preparations to ward off the two conventional threats posed by Hezbollah and Syria, and the unconventional threat posed by Iran. The budgets required in each case beggar belief.

Hearing this, Bush quickly put his hand in his pocket and pulled out a bundle. But he needs to know that even another $600 million a year is not enough. Israel cannot juggle all these dangers simultaneously and also continue to invest in the economy and address the country's social ills − fighting poverty, reducing socioeconomic gaps, improving education and expanding the health basket.

In recent years, we have closed our eyes to this grim state of affairs. We thought we could turn the Israel Defense Forces into a contractor for policing the territories without having to train soldiers, either regular troops and reserve units, for the possibility of real war. The army also thought it could postpone replacing equipment and military gear. It was notoriously lax in the upkeep of its armored personnel carriers and tanks. The consequences were evident in the bitter fiasco of the Second Lebanon War.

Bearing all this in mind, Olmert has a critical mission before him: to whittle down the number of threats facing Israel. From his promises to Palestinian Authority Chairman Mahmoud Abbas at Sharm el-Sheikh, and his impassioned call upon the Arab countries to sit down and talk peace, Olmert is showing that the penny has dropped: We can no longer wave the defense banner and the socioeconomic banner at one and the same time.