Knesset confirms Shamir as new Israeli prime minister

By , Special to The Christian Science Monitor

Foreign Minister Yitzhak Shamir took over as prime minister of Israel Monday from ailing Premier Menachem Begin in the midst of an economic crisis that would have brought down many parliamentary governments.

Prior to a confidence motion in which Mr. Shamir got 60 votes out of the 120 -seat Knesset (parliament), opposition leader Shimon Peres challenged Shamir. ''You should have . . . asked for new elections,'' he said.

But the weakness and divisions of the opposition Labor Party (which mustered 53 votes against Shamir), coupled with the desire of small government coalition partners to remain in office, leave uncertain the question of whether the government will serve out the remaining 19 months of its term or, as many observers believe likely, call a new ballot some time in 1984.

Recommended: Default

The Israeli stock exchange remained closed in a government effort to stem heavy selling of bank shares prompted by expectations of a sharp currency devaluation. Sales of foreign currency were suspended Monday morning. Shamir warned the Knesset that Israel was living beyond its means and indicated economic austerity measures and further devaluation of the shekel would be among his first concerns in office. On Monday, the shekel was devalued by 5.5 percent.

Prime Minister Shamir, a small, bushy-browed, less flamboyant man than Mr. Begin, will also inherit the problem of Israeli involvement in Lebanon and the issue of the Israeli-occupied West Bank and Gaza. Shamir is a man whose views parallel or are even more hawkish than his predecessor's. In presenting his government to the Knesset, Shamir said that Israel would leave Lebanon ''when security conditions [for northern Israel] are assured'' and Syrian troops leave Lebanon.

A staunch advocate of Jewish settlements on the West Bank and Gaza, and of Israeli retention of these areas, he told the Knesset ''this sacred work [ settlements] must not stop. It is the heart of our existence and life.''

The opposition Labor Party has charged that the government could save substantial sums by cutting back on settlements. But Shamir - who indicated figures for government investment in settlements were exaggerated - made it clear that cost would not be a factor in continuing settlements.

The economic crisis he will immediately confront will sorely try Shamir. He is more cautious and less forceful than Begin, but he will be called on to persuade almost exactly the same Cabinet to adopt measures that the fading ex-premier was unable to ramrod through.

Israeli inflation is running at 130 percent, one of the three highest national rates in the world. Politically motivated policies have encouraged massive consumer spending and a mushrooming trade deficit. The government only recently pushed through a package of major budget cuts designed to ease Israel's economic woes. But these were frozen following Begin's bombshell resignation announcement on Aug. 28. And small coalition parties have already bargained for rollbacks in areas affecting their constituencies as the price of their joining Shamir's government.

The current crisis evolved after the ever-expanding trade deficit created expectations of a large shekel devaluation. This sent investors hurrying to purchase foreign currency. To do so they began massively selling shares, including bank shares that until now had been considered one of the safest and most liquid investments in Israel.

But Israeli banks had been artificially propping up the price of their shares by purchasing them with their own capital. When the run on bank shares began, the banks turned anxiously to the government to help them out of the jam. The government agreed to guarantee the dollar value of the bank shares, pegged to the price at a fairly recent date, provided they would be held for a minimum of several years to avoid strain on the banks. Those investors who needed their money sooner were expected to take losses of from 7 to 30 percent when the stock market reopened.

The bank crisis sent shock waves through the Israeli public - which holds $7. 5 billion in bank shares - because many small investors have come to favor this means of saving. Playing the stock market has become a commonplace gamble here for middle- and even lower-middle-class savers out to beat inflation. The overvalued stock market has already suffered several big jolts in recent weeks.

This time many of the losers are the very constituencies that have faithfully supported the Begin, and now Shamir, government. But the anger amid crowds besieging banks could portend not only a loss of confidence in the Israeli economic system, but a real jolt to faith in the now Begin-less Likud government.

Opposition Labor Party leader Peres, in his Knesset reply to Shamir's speech, was quick to attack the ''bankrupt economic policies'' of the government. He said the policies ''now punish the naive ordinary citizen.'' He also charged the government with ''creeping annexation'' of the Israeli-occupied territories and ''lack of clear purpose in Lebanon, where none of the promises are coming true.''

What has especially infuriated the opposition, and some government members as well, is that Finance Minister Yoram Aridor has retained his seat for reasons having more to do with internal politics than successful policies.

There is concern here about public reaction once the stock market is reopened lest a panicky rush to sell shares, despite losses, jeopardize the reputation of Israel's banks abroad.

Finance Minister Aridor has suggested easing Israel's foreign debt burden - at $21 billion, the world's largest on a per capita basis - by asking the United States to give less overall aid but give all of it in grants rather than the present mix of grants and loans.

Much of Israel's heavy debt stems from repayments for sophisticated US arms purchased in a spiraling arms race with Arab states. While the original cost of the war in Lebanon was largely covered by special taxes, the Israeli troop presence there is costing the government $1 million a day. But Defense Minister Moshe Arens has said that Israel's commitment to spend large sums on new arms purchases in the US would make it difficult for Israel to cut its aid request to Washington.

Share this story:

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...