Problems persist for Israeli Cabinet. Coalition survives but image is badly tarnished

Israel's ``national unity'' government has survived its most serious crisis bruised, battered, and no closer to resolution of the problems which precipitated its near collapse. The resolution of the crisis has done little to obscure the damage sustained by the government and its parties. The week-long exchange of bitter recriminations exacerbated already strained relations and have tarnished public images of the parties involved.

The Cabinet approved a compromise formula Sunday for a portfolio swap betwen Finance Minister Yitzhak Modai and Justice Minister Moshe Nissim, both of the right-wing Likud Party. The solution ended the week-long crisis caused by Prime Minister Shimon Peres's demand that Mr. Modai leave his post and Likud's threat to leave the government if Modai was fired.

Mr. Peres, who heads the centrist Labor Party, made the demand after weeks of tension between the two men over the government's economic policy, which peaked when Modai attacked Peres in press interviews about a week ago.

Political analysts note that Peres achieved his goal of ousting Modai on what he called ``a matter of principle'' relating to collective responsibility, and successfully played on the Likud's interest in gaining the premiership in October to extract agreement to his demand.

But at the same time, the analysts say, Peres's apparent willingness to risk a Cabinet collapse has exposed him to charges that he engineered the crisis to break up the government and avoid transferring power to Likud leader and foreign minister, Yitzhak Shamir. Under the terms of a ``rotation'' accord signed by the two coalition parties when neither won a sufficient majority to form a government in the 1984 elections, Mr. Shamir and Peres are scheduled to exchange posts in October.

Peres's concern that he might appear untrustworthy to the public influenced his decision to seek a compromise and show he was faithful to the coalition agreement, some observers say.

But Peres has also risked losing credibility from his own supporters. They are disappointed by his apparent inability to follow through on his threat to fire Modai from the Cabinet altogether, and by previous crises in which Peres failed to sack ministers critical of him.

The Likud was shown to be desperate for rotation, willing to accede to Peres's demands in order to preserve the government until Shamir assumes power.

The crisis also revealed the deep rifts between Likud ministers vying for control of the party.

Housing Minister David Levy, who was overseas when the crisis broke, returned to Israel over the weekend and charged that Shamir, Modai, and Trade Minister Ariel Sharon, who worked out the compromise, had sold out Likud by agreeing to Modai's ouster. Some analysts say Mr. Levy, who has challenged Shamir for leadership of the the Likud, was opposed to any deal that would preserve the government and allow Shamir to become premier in October.

But the worst victim of the crisis semed to be the government itself. Its credibility in the public eye was apparently heavily damaged by the crisis.

Press opinion reflects a growing disgust with what is widely viewed as the government's increasing embroilment in power struggles which have little to do with the public good. The crisis was ``an insult to the nation's intelligence'' and ``a nadir in the country's political morality,'' wrote political analyst Roy Isacowitz in the Jerusalem Post.

The crisis ``damaged public respect for the government and harmed its credibility,'' said Minister Yosef Shapira of the religious Morasha Party after the Cabinet vote, from which he abstained.

One official said the government's increasing preoccupation with internal squabbles was having a debilitating effect on its ability to function effectively.

Peres was quick to point out after the Cabinet meeting that the government's economic stabilization and growth program would remain intact despite the change at the Finance Ministry. But many observers say that although Modai was an able, if not particularly loyal, finance minister, Mr. Nissim has legal training but no experience in economic matters.

Despite the damage caused by the crisis, both Labor and Likud appear condemned to continue their unhappy partnership, for lack of an immediate alternative. Both are uncertain they would win a clear majority in a new election.

At best, the government's future looks clouded. A growing realization in Israel of the mounting cost of such crises may determine how long the troubled coalition will be allowed to survive.

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