In Israel, economy scarier than prospect of Iraqi missiles

TEL AVIV — So bad is Israel's economic situation that some residents in the Negev town of Sderot actually welcomed the Kassam rockets Hamas fired at the town — as if the much-needed rain had arrived.

"It's actually a good thing the rockets hit here," said a smiling Shiran Avraham, 17, surrounded by a half-dozen tittering teenage girls. "No one would pay any attention to this place without them, and we certainly would not have gotten the benefits of a city on the 'front line.'"

Last week a rocket missed, by about 30 feet, the Ulpana Girl's School that Avraham attends in Sderot, a city that suffers both from constant barrages of rockets and chronic unemployment and poverty.

Avraham, toting a faux designer handbag, was unfazed, like most people in town.

She explained that her family, like most others here, needs the added benefits allotted to residents of cities the government considers on the "front line." The benefits include lowered income- and land taxes and increased budgets for infrastructure, social services and education.

So important are the benefits in these times of crisis that Mayor Eli Moyel proudly considers his success in securing the benefits just last week as the centerpiece of his tenure as mayor.

As Israel braces itself for an imminent U.S.-led war against Iraq, residents are more concerned about their sagging pocketbooks than about donning gas masks or finding plastic sheeting to seal emergency rooms.

A poll released by the Israel Forever Foundation indicated that nearly twice as many Israelis — 20 percent — are concerned about the economic situation as about a possible Iraqi attack (11 percent).

Finance Minister Benjamin Netanyahu told Israelis on Monday that a $6 billion deficit has left state coffers empty. To combat Israel's economic woes, Netanyahu unveiled a new austerity plan that promises to be as painful as it is drastic.

To remedy Israel's economic implosion, Netanyahu's plan is designed to cut the ever-decreasing fat in the national budget. If cuts already passed in December 2002 are included, Israel's per annum budget will be sliced by about $4 billion dollars, or some 8 percent of the total budget.

Every ministry but the Defense Ministry will lose 2 to 3 percent of its budget.

The protracted intifada, plus breakneck preparations for a possible attack from Iraq, have sent the defense budget soaring while knocking the economy into recession.

According to Netanyahu's plan, the public sector will be hit hardest. With a progressive salary cut ranging from 6 percent for low-wage earners to 12 percent for higher earners, no one will be spared.

The plan also reportedly includes mass layoffs, and tens of thousands of public sector employees could lose their jobs in coming years.

Netanyahu has particularly targeted the Education Ministry, reducing the number of administrators and teachers and amalgamating certain positions and authorities. The cuts also will reduce social security and child benefits, while raising the pension age to 67.

Even before the cuts are approved, the country faces a social services gap that some people are trying to fill.