As world markets in Russia, East Asia and the South Pacific plummet, the once-vulnerable Israeli economy has shown signs of avoiding the financial roller coaster.
In fact, the economic turmoil may indirectly strengthen the shekel, according to former Israeli defense minister Moshe Arens, who took time out from his U.S. speaking tour to talk to the Bulletin in a phone interview from Florida.
The Shamir adviser-turned-businessman was slated to talk about the peace process at a San Francisco Israel Bonds reception, which took place yesterday.
In the interview, Arens speculated that the instability of foreign markets will strengthen the dollar in Israel, and in turn devalue the shekel.
While that sounds bad, it actually works in Israel’s favor, he said, because the value of the shekel is thought to be inflated. As the shekel falls, it could stimulate Israel’s export market and spur national employment.
The surge in production would be a welcome shot in the arm for the Jewish state after a period of sluggish economic growth and rising unemployment.
“We’ve had a decrease in the growth rate from [a booming] 7 percent a year to 2 percent a year,” Arens noted.
No one knows for sure what triggered the downturn. Arens says several popular theories are plausible:
“Some say that it was the end of the very high immigration from the [former] Soviet Union. It provided a boost to the economy. As [the immigration] started tailing off, that made itself felt.”
Others speculate that the government’s fiscal policies were too restrictive for business, Arens said. Still others blame the Netanyahu government for dashing peace’s promise of economic opportunity.
“We’ve had a slowdown in tourism. If the peace process had proceeded quickly maybe that would have been different,” he said.
The old-school Likudnik is credited with grooming Benjamin Netanyahu for prime minister. Though Arens has more hardline ideas about the territories and national security, he credits Netanyahu for making the best of the Oslo agreement — “a decision fraught with danger for Israel.”
By negotiating directly with the Palestine Liberation Organization rather than representatives of Palestinian communities in the territories, Oslo may force Israelis to honor what the Palestinians refer to as their “right of return.” If granted, that claim would send thousands of diaspora Palestinians to reclaim the land of Israel, thereby dissolving the Jewish state, Arens warned.
“Oslo gave the clear impression that [the Palestinians] were going to get the entire West Bank. That has been creating problems in negotiations. Netanyahu has done the right thing in disabusing Arafat of the notion that he’s going to get the entire West Bank.”
Arens is not worried about the outcome of peace negotiations. He is confident that like the long-delayed peace treaties with Egypt and Jordan, an arrangement with the Palestinians also will come to pass.
“It’s taken the Arab world a long time to recognize that Israel is here to stay.”