Israeli stocks soar on roadmap vote

Mr Sharon won the cabinet vote only narrowly

Shares on Israel's premier stock market have surged in the wake of news that Prime Minister Ariel Sharon's cabinet has approved the international "roadmap" to Middle East peace.

Despite the fact that almost half the cabinet voted against, amid a welter of objections, investors took heart and rapidly wiped out almost all the losses seen in early May.

In afternoon trading, the bulk of Monday's gains had evaporated amid profit-taking to leave the Tel Aviv Stock Exchange's 25-share index up 0.4% at 409.35.

But that still left the market sitting comfortably on the 7.2% jump seen on Sunday, the day the cabinet decision was made.

More than 700m shekels worth of shares changed hands, more than twice the daily average during 2003.

Hard times

The TASE-25 index has been languishing below 400 for more than a year, excepting a brief spike in late April thanks to the end of hostilities in Iraq.

Since then, sharp falls have been the order of the day as the country suffered a general strike by public sector workers angry at swingeing pay cuts and layoffs.

The cutbacks - part of a budget which Israeli newspapers reported has now, finally secured enough votes to make it through Parliament - are the result of a crippling economic crunch.

More than two and a half years of fighting between Israelis and Palestinians has combined with the world economic slowdown to produce unemployment rates of more than 10% and a budget deficit swelling to as much as 6% of national output.

The US is offering $9bn in loan guarantees to help bridge the gap, but every government activity is being slashed except security - and some benefits for ultra-Orthodox Jews, to make sure the parties that represent them keep supporting Mr Sharon.

Objections

The split in the cabinet was shown by the number of votes against the roadmap.

Many Israeli commentators pointed out that Mr Sharon would be happy to have the objections registered, not least because he is widely believed to share them.

The cabinet of new Palestinian prime minister, Mahmoud Abbas, also known as Abu Mazen, has already approved the roadmap without conditions.