Israeli Prime Minister Ariel Sharon’s national unity government collapsed on Wednesday when the State’s Labor Party withdrew from the coalition in a dispute over spending on Jewish settlements in the West Bank and Gaza. New elections are expected in the near future.
Labor Party members demanded that an allocation of $147 million intended for the expansion of the settlements be dropped from the 2003 budget, which was approved by Israel's parliament in its first reading. Sharon refused to omit the provision.
Expert analyses of Israel’s future economic state vary. While International rating agency Standard & Poor's (S&P’s) predicts that the government’s instability could downgrade its ratings, Moody's Investors Service maintained that the nation’s stable institutions and access to foreign hard currency would compensate for the turmoil, reported Reuters.
S&P’s predicts that the breakup of the government will delay the passing of the budget, which they see as “critical for the country’s rating”, stated Managing Director of the Agency, Konrad Reuss. They also forecast that the political uncertainty could hinder Israel’s ability to pay off its debts.
Earlier this year, S&P revised its outlook on the state of Israel to negative from stable. The revision reflected growing fiscal and economic pressures on Israel as a result of the continued recession and the tense security situation in the country. — (menareport.com)
© 2002 Mena Report (www.menareport.com)
