Newspaper article The Christian Science Monitor

As Israel Fights on, Economy Reels ; Israel's Economic Growth Was Negative Last Quarter amid Rising Joblessness and a Faltering High-Tech Sector

Newspaper article The Christian Science Monitor

As Israel Fights on, Economy Reels ; Israel's Economic Growth Was Negative Last Quarter amid Rising Joblessness and a Faltering High-Tech Sector

Article excerpt

A 50-year history and a reputation for the best hummus in town has not been enough to save the Rahmu restaurant in West Jerusalem from the threat of extinction. Eleven of 13 tables were empty during lunch hour Tuesday, as was much of downtown's Salomon Street, where stores and restaurants are folding up.

"People do not want to sit down and then be blown up," says Shmulik Nahmias, one of the owners.

But Mr. Nahmias is determined to stay in business. He reasons that if people cannot reach his hummus, he will bring the hummus to the people. Personally. He has started driving his family car around the city, delivering majadara and moussaka to hungry customers. "Delivery is the future," he says. "If it doesn't work, forget about it, we'll close."

In a sense, Nahmias and a growing number of Israelis, are economic casualties of the year-and-a-half of fighting with the Palestinians.

But despite the personal pinch, economics has yet to play a role in Israel's handling of the conflict with the Palestinians, analysts say. With a widespread feeling thus far that there is no choice but to fight - and with a national unity government facing weak opposition and no significant challenge to its policies - few people are currently linking the economic troubles to the government's militaristic policies, the analysts say. However, this could change as the conflict wears on, affecting an increasingly broad section of the population, they add.

"In any recession the hardest hit are the lower classes," says Haifa University sociologist Sammy Smooha. "If expenditures are cut, it means they get less services, and they cannot provide the services on their own. They are also the ones hardest hit by unemployment. Israeli Arabs, Ethiopian immigrants, working class people, the poor - these are people who are adversely affected. But the small proprietors, the petite bourgeoisie, are losing their clients. These businesses are closing down by the thousands and getting no help from the government."

Unemployment has risen steadily from the 8.8 percent figure it was at the start of hostilities in Sept. 2000 to 10.1 percent in January. Economic growth was negative last quarter.

Also contributing to the recession were troubles in the country's high-tech sector, which predate the fighting.

The fallout is far more acute on the Palestinian side where military sieges and fighting have caused rocketing unemployment and left a growing number of families dependent on emergency assistance from the UN.

Israel is experiencing its worst budgetary crisis ever, with a more than $10 billion deficit that is being widened by the expense of the current offensive in the West Bank, launched after a devastating series of suicide bombings. Spending cuts and possible tax hikes are in the works, and economists believe that middle- class and poorer Israelis will be the ones most adversely affected. …

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