Israeli Prime Minister-designate Tzipi Livni might reap a political harvest in the tottering financial sector as the looming market crisis helped draw the second largest party closer to her new government.
With stock markets tumbling across the world, Israeli stocks also plummeted. The Tel Aviv Stock Exchange's benchmark TA-25 index lost 6.3 percent on Sunday, falling below 800 for the first time in two years, with the broader TA-100 down 7 percent. The Real Estate-15 plunged 11 percent, generating a loss of more than two-thirds of its value since the start of the year.
On Monday, the Israeli market continued to fall at a lower pace, with the TA-25 and the Banks-5 indexes losing 3.2 percent and nearly 4 percent respectively.
Facing the jittering market, Israeli Defense Minister Ehud Barak, chairman of the Labor Party, said Monday that Israel's most urgent priority is to deal with the spreading financial crisis, which local daily the Jerusalem Post said hinted that he would drop his demand to expand the budget framework in coalition negotiations with Livni.
As the new leader of the ruling Kadima party, Livni is now engaged in intensive efforts to cobble together a new cabinet. Since Kadima, although being the biggest party in the parliament, possesses only 29 out of the 120 seats, it has to rule in the form of a coalition government. Labor is apparently a superior option as it is both the second largest with 19 seats and a current ruling partner.
Among the conditions Labor has reportedly listed for its stay in the coalition, one is to revise the 2009 budget, a demand also held by the Shas Party, another current governing partner with 12 seats, which Livni is also trying to draw into her administration.
Yet in a meeting with some senior business leaders on Monday, Barak was quoted as saying that while all of Labor's demands in the ongoing coalition talks are still on the table, resolving the economic crisis must be the top priority.
"I think that right now the most urgent thing is to deal with the economic crisis," said the former prime minister. "The strength and intensity of the crisis obligates us to deal with it first."
In this way, Barak was seen as lowering Labor's demands for budget expansion, said another daily Ha'aretz. The Jerusalem Post predicted that Barak's "concession" to Kadima on the matter is expected to expedite the coalition talks, as the economic issue was said to be the biggest stumbling block.
For her part, Livni also addressed the economic pinch on Monday, telling the Middle East Quartet's envoy and former British prime minister Tony Blair that Israel needs stability to handle the financial crisis.
"The right way to deal with the crisis is to remove the current uncertainty and to create political and economic stability that will enable the government to prepare in advance the necessary plans to deal with any situation that may arise," the Jerusalem Post quoted her as saying.
On Sunday, the would-be second woman premier in Israel's history indicated that she would oppose any substantial revision of the 2009 budget which passed the cabinet last month, saying that Israel's economy is demonstrating stamina despite the crisis and Israel needs to maintain economic stability alongside political stability to deal with the various challenges.
"Economic policy cannot be irresponsible and connected with the need to form a coalition. We need to maintain the (budget) framework, so Israel's citizens will know the government is rising above the political needs of some of the parties with which I'm conducting coalition negotiations," she was quoted by Ha'aretz as saying, while urging Labor and Shas to "rise above political needs and preserve economic stability."
Both outgoing Prime Minister Ehud Olmert and Finance Minister Ronnie Bar-On have also said that there is no need to change the 2009 budget. The Bank of Israel on Tuesday reassured the public that the Israeli economy is in good shape and the central bank is well-equipped to deal with the escalating global financial crisis.
Even if there is a sense that the economic crisis is bringing Barak closer to joining a Livni government, there has been no realchange related to Labor's demands, Ha'aretz quoted Barak's close advisers as saying, who added that no agreement has yet been reached with Kadima on other issues.
Meanwhile, Livni's advisers was quoted as saying that coalition negotiations would only pick up speed after the Yom Kippur fast on Thursday, and that Shas is expected to wait to see how Labor acts.
Livni now has about a month to form a new government within the42-day time limit. Should she fail, an early general election would probably be held in the spring, in which polls showed that the rightish Likud party would beat Kadima and Labor and become the biggest winner.
Source:Xinhua
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