Israeli business calls for coalition

Elections late in January gave Prime Minister Ariel Sharon's Likud Party a decisive lead in terms of seats in the Knesset, or Parliament, but leave him seeking coalition partners after former partner Labour vowed not to renew the relationship.

Even so, some 50 top Israeli businessmen have come together to call for a broad coalition.

"Only an emergency government. as large as possible with an economic focus, can for a limited period take the vital steps for our economy," said Oded Tira, head of Israel's biggest industrial leaders' grouping after a meeting in Tel Aviv on Tuesday.

In the meantime, fears about the effects of war on Iraq were depressing both the shekel and the Tel Aviv stock exchange.

On the ropes

Israel's dire straits were underlined on Tuesday by figures showing tax revenues were 17% lower in January than in the previous year.

The deep recession gripping Israel since the start of the current Palestinian uprising in 2000 is the main cause, although late tax rebates delayed from December to January also contributed.

And although January is normally a good month for the public coffers, marking the arrival of billions in aid from the US, 2003 produced a record 2.6bn shekel (£323m; $532m) deficit.

Without radical change, that guarantees Israel will crash through the 15bn-shekel deficit the government has allowed for the full year, potentially undoing a network of delicate budget compromises.

Partnership troubles

What the business leaders want more than anything is for Labour leader Amram Mitzna to backtrack on his opposition to siding once more with Likud.

Labour has said it will only join a coalition if Likud rows back from its hardline policies vis-a-vis the occupied territories, which it says damage both Israel's security and its principles.

It says without concrete change from Likud - unlikely given Mr Sharon's election victory - it will merely be a figleaf for Likud's platform.

But without Labour, the likely coalition would include far-right parties keen on such ideas as killing Palestinian leader Yasser Arafat, which might weaken the US support on which Israel depends.

Mr Sharon's government is currently seeking up to $12bn in defence help and loan guarantees, far beyond the $2bn or so Israel already gets each year.