by David Landau
After this roller coaster, the election itself was something of an anticlimax. The Likud won with a substantial (for Israel) thirty-eight seats to Labor’s miserable nineteen. Reuven Adler’s election slogan, “The people want Sharon,” showed penetrating insight into the public psyche. The people wanted him regardless of the criminal allegations welling up around him. Most people presumed that at least some of the suspicions were well-founded, despite his slick “victimhood” spin. Nevertheless, they wanted him. They wanted him to keep fighting the intifada, even though his success there had been, thus far, at best partial. They wanted him to keep running the economy, even though his record there was poor. They wanted him to make his “painful concessions for peace,” even though they didn’t know what these would be, and he himself probably didn’t know yet, either. They wanted him despite the ugly aspects of the party he headed. Even people who voted against him and feared his policies no longer feared him. There was no surge of horror or trepidation on the left after his victory this time, not only because it was expected, but because voters who were horrified last time had since learned that he behaved now with caution and restraint. He had come to be seen, over two frightening and depressing years, as a responsible adult whom, in hard times, people in general felt fairly comfortable to have at the helm, even if they had not voted to put him there.
To the extent, though, that Sharon’s election triumph in 2003 was a victory over the coalition of police, prosecution, and press that pursued, leaked, and published his various suspicious-smelling “affairs,” it was only a partial victory. They were defeated at the ballot box, but he could not ultimately suppress them. With unflagging persistence, they continued to harry him, and he continued to parry them, to the very end.
Amram Mitzna, the defeated Labor Party leader, had solemnly proclaimed before the election that he would not serve under Sharon in a unity government. He made the same declaration on the night of his defeat. “Sharon hopes that the Labor Party will once again serve as a fig leaf for his failed policies,” he told his dispirited cohorts at the party headquarters in south Tel Aviv. “But we do not intend to join him. We intend to replace him.” Looking back years later, Mitzna maintained that he was in fact prepared to join a unity government “regardless of what I’d said during the campaign” (and on election night)—if it was based on a policy of separation from the Palestinians, whether by negotiation or unilaterally.
A first postelection meeting with Sharon was barren. Sharon waited a fortnight and invited Mitzna again. Mitzna suggested that the new government prepare a compensation package for settlers who sought voluntarily to relocate back to Israel proper. Sharon reacted negatively as Mitzna must have assumed he would. But they carried on talking. At their third meeting Mitzna said, “You’ve got to give me something tangible. It can be one settlement.” He demanded that understandings between them be drawn up in writing. “But the next day,” Mitzna recalled, “Uri Shani phoned to say he was very sorry but the prime minister was not prepared to put anything on paper. He would not commit even to the vague things he had said about ‘painful concessions,’ about doing ‘great things.’ He never spoke explicitly of evacuating settlements. It wasn’t I who shut the door on the unity government.”23
But he shut his ears to what Sharon was saying, says Reuven Adler, who was present at that third meeting. “Arik said to him, ‘Look, we’re not far apart. I’m not drawing you into some kind of honey trap. Join the government with me.’ He was trying to tell him something. But Mitzna didn’t hear it. Either because he wasn’t experienced enough in politics, or because he was one of those people who had such a fixed opinion of Arik that they could not see, or could not believe, that Arik was going through a process.”24l
With Labor out of the running, Sharon quickly sewed up a coalition with the secularist Shinui Party, the National Religious Party (NRP), and the National Union–Yisrael Beiteinu. Ehud Olmert did the negotiating with the Shinui leader, Tommy Lapid, his close personal friend, and Effie Eitam, the NRP’s firebrand leader. Olmert persuaded Eitam that Shinui was not antireligious, just anti-haredi. Thanks to Olmert’s resourcefulness, the three disparate factions reached agreement on the sensitive issues of state and religion.
With this latest service to Sharon, Olmert hoped he would be rewarded with the prize he had set his heart on, the Ministry of Finance. It was an open secret that Sharon wanted to shift Silvan Shalom for this key position, which was becoming more crucial as the state of the economy grew more parlous. Sharon, however, offered Minister of Foreign Affairs Netanyahu the Finance Ministry. “I see this as a firing,” Netanyahu retorted, plainly startled. Not at all, Sharon assured him. If anything, it was a promotion, but, more important, it was a call to arms. The state of the economy was desperate. He promised his total support for the tough measures that would have to be taken. They would work in harmony. Bibi would be, for all intents and purposes, autonomous in making and executing economic policy.
The pundits argued later over whether Sharon in fact meant Netanyahu to accept or reject his proposition. Sharon welcomed a hangdog-looking Silvan Shalom, the current finance minister, into his office. “I told him, as I’d told him many times before, either the Finance Ministry or out,” Shalom recalled later.25 “Out,” Sharon replied, smiling, and after a moment of incomprehension and another of disbelief a smile of gratified serenity spread over Shalom’s intense and sad countenance. “Out,” or hutz in Hebrew, is also the word for “foreign,” as in Foreign Ministry, or Misrad Hahutz. Shalom’s honor and his political career were saved. “You should have known that I would never hurt you,” Sharon told the younger man. “I don’t forget the people who stuck with me through the hard times.” Shalom might have been forgiven for musing to himself that that was precisely what Sharon had done to David Levy last time around.
Sharon offered Olmert the Ministry of Industry and Trade, his own old stomping ground, but met with an angry rejection. Sharon refused to give up. He began beefing up the meat-and-potatoes offer with succulent side dishes: the Israel Lands Authority, which he had always run himself; the Planning Authority, which had been part of the Prime Minister’s Office; ministerial responsibility for state television and radio, a much-sought-after political plum; membership on the cabinet defense committee and the kitchen cabinet; and, finally, the prized title of vice prime minister. This mollified even the wounded Olmert.
An assault on child allowances was the centerpiece of the new government’s effort to bring the state budget under control. Welfare and defense were the two areas of runaway spending. Defense was effectively untouchable, for both objective and political reasons. Welfare took the brunt of the cuts. The seemingly remorseless growth of both welfare budgets and welfare constituencies was abruptly reversed. With time, and assisted by an upturn in the global and local economies, the proportion of Israelis in the workforce began to rise. This had been the deepest malaise in the Israeli economy. During Sharon’s second term, with Netanyahu at the helm of the economy, this key index of economic health went up from a seriously sick 53 percent to a still-lagging but more respectable 56 percent.
Netanyahu’s reforms were a watershed; he deliberately set out to change the structure of the Israeli welfare state. To his critics, he came close to destroying it. Even keen supporters accused him of going too far too fast. The basic reform, so desperately needed, remains in place, though Sharon’s successor, Ehud Olmert, took steps to mitigate its harshest effects. It is gradually coaxing haredi men and Arab women into the workforce. Birthrates in both communities have begun to fall, more markedly among the Arabs.
In parallel, Netanyahu and his Treasury mandarins declared war on Israel’s bloated public sector. Here again, their tough steps to streamline and downsize central government and local authorities were assisted, after mid-2004, by the general economic recovery. More jobs were created in commerce and industry as revenues began to rise again. The private sector grew and flourished. First, exports began to grow, and after mid-2
004 the domestic consumer market also began showing signs of recovery.
A sweeping tax reform begun in 2002, when a capital gains tax was first levied on companies, was now extended to include individuals, who were henceforth required to pay tax on most forms of unearned income. At one fell swoop, the tax base was significantly broadened. At the same time, tax rates on earnings were reduced—a central plank in Netanyahu’s economic credo.
With Sharon’s robust backing, Netanyahu was determined, too, to push through a wholesale reform of the Israeli pension sector. The pension reform became the linchpin of Netanyahu’s comprehensive overhaul of the capital market. The old-style “defined benefits” pension system, which was heading inexorably toward bankruptcy, was stopped dead in its tracks. Existing pensions were put under the direct management of the Treasury; new pensions would be run by new funds, based on actuarially sound premises, a pension age raised by law from sixty-five to sixty-seven (for men; women could retire earlier), and the ability to invest in a wide range of financial instruments. In comparison with much larger and more advanced European economies, Israel’s decision to grapple with the inherent and ominous weakness of its pensions industry was both bold and timely. As in Western economies, the new pension funds now quickly became major players on the capital market.
Getting the haredim out to work was unimpeachably good economics. It was sound sociology, too, and brave politics. “To understand the creation of the coalition in 2003,” says Omri Sharon, “you have to understand the showdown with Shas during 2002. My father learned the hard way that Shas’s price was too high, that they were so set in their ways you couldn’t do anything together with them. They were opposed to any change at all. He was attracted now to doing something without the haredim. Doing something really meaningful.”26
Ilan Cohen, too, who was to become director general of the Prime Minister’s Office later in the term, says Sharon deliberately sought a coalition without haredim in order to institute the economic reforms that the country so direly needed. But there was a serious downside to this, precisely the downside that Yitzhak Rabin had understood, had feared, and had bent over backward to avoid as he embarked, in 1992–1993, on the repartition of Eretz Yisrael. Rabin, as we have seen, was at pains to ensure that he had Shas in his coalition when he first negotiated with Yasser Arafat. Ehud Barak, too, who saw himself as Rabin’s true successor, pointedly ignored his own supporters’ pleas to keep Shas out of his government. Intent on a bold, historic attempt at peacemaking, he determinedly sat Shas and Meretz together at his cabinet table.
Sharon, by his own account, was bent on offering “painful concessions” and ending the occupation. With Shas out of government, he would have most of the religious sector arrayed against him and, more important, arrayed against the territorial concessions he intended to make.27 For many Orthodox Jews, territorial concessions would be depicted as heresy, and Sharon himself would be cast as a heretic—just the scenario that Rabin had so wisely managed to avoid during the crucial first phase of Oslo.
Could Sharon have avoided it, too? The answer, sadly perhaps, is that he was not prepared to try if trying meant kowtowing, as he saw it, to Rabbi Ovadia Yosef, the aged spiritual leader of Shas. He was not prepared, as his son Omri explained, to visit the sage in his home in Jerusalem, because he thought that it was demeaning for a prime minister to do so.28 There is certainly something to be said for such zealous upholding of prime ministerial dignity. But the plain if lamentable fact was that Rabbi Yosef, then eighty-three, had become accustomed to all the politicians paying him homage at his home and he had come to expect it. The only possible way to swing Shas around, moreover, was a personal conversation with Rabbi Yosef. The rabbi had written magisterial halachic opinions in the past on the need to compromise over the Land of Israel rather than risk more bloodshed. He was, in his heart, a moderate. The Shas politicians, mediocre men who pandered to the increasingly xenophobic sentiment among the party rank and file, tried to repress their leader’s principled position and to persuade him to repress it, too. Sharon needed to cut through them and reach the sage himself. But he refused to do so.
* * *
a The economic recovery finally took hold during Sharon’s second term, when Netanyahu served as finance minister, enjoying Sharon’s blanket backing. “In his first term, Sharon wanted to be hands-on economic czar,” the then finance minister, Shalom, complained. “By the second term, he was focused on [the disengagement from] Gaza. He didn’t want Bibi to interfere with that, so he didn’t interfere with economic policy.” Worse yet, from Shalom’s rueful perspective, the tough policies that he himself had instituted during the first term began to show results during the second—and Netanyahu got all the credit for them. Netanyahu, moreover, added insult to injury by repeatedly asserting that he had taken over, indeed rescued, an economy on the verge of collapse. This version stuck, and Netanyahu was feted in the political community and in much of the media as an economic wizard.
In fact, he deserved most of the accolades, though Shalom deserved some, too. Shalom’s decisions to pare down welfare transfers, especially child allowances, were brave politics. But there was no real alternative given the situation that he and Sharon faced of soaring defense costs and recession throughout the economy. For Netanyahu, who took this emergency policy, expanded it, and institutionalized it, forcing able-bodied people to fend for themselves was a matter of long-held ideological belief, not just of immediate budgetary expediency.
For Sharon, it was a matter of common sense. “They should sweep the streets,” he asserted, thumping the table, at a meeting of his economic ministers on unemployment in early July. “Our cities are dirty. They need cleaning. They should work in hospitals or guard in kindergartens. Even if they don’t get paid, they should do something in return for the unemployment benefits they receive. They shouldn’t get these benefits if they don’t do anything.”
b By law, the elections had to be held before November 2003.
c See p. 421.
d A deal to this effect had been worked out behind the scenes by Uri Shani, on behalf of Sharon, and Yisrael Katz, acting for Netanyahu, who made the initial overture.
e They accepted the air force’s contention that a smaller bomb would not do the job. A caution from the deputy head of Shin Bet, Yuval Diskin, that the bomb might cause more widespread carnage in the densely populated district was ignored.
f This and other direct quotations are from the text of the “Performance-Based Roadmap to a Permanent Two-State Solution to the Israeli-Palestinian Conflict,” which was formally published in April 2003 by the Middle East Quartet, comprising the United States, the EU, Russia, and the UN. See Appendix.
g New loan guarantees from Washington, when they were finally negotiated the following March, covered $9 billion—$1 billion more than Israel had asked for. By then, Netanyahu was serving as Sharon’s finance minister, and his tough economic policies were earning broad admiration in the international business community.
h Weissglas explained that he could not advise the family in this matter because he, too, was under investigation for having set up Annex. Another lawyer, Dori Klagsbald, was approached. His advice, said Weissglas, was inevitable: repay the money. Every lawyer would have had to say the same, Weissglas explained, given the unequivocal language of the Parties Law (sec. 28). Failure to repay illicit funds could result in a fine, under this section, of up to four times the sum illicitly raised or spent (Weissglas interview, Tel Aviv, July 10, 2008).
i In addition to Ariel Sharon’s suspicious answers, the Israeli government lawyers wrote to their South African colleagues, his son Gilad had behaved suspiciously by avoiding for months the standard legal requirement that he specify in writing the source of the $1.49 million that had landed in his and his brother’s account. Only after he learned that the police were investigating this transaction did he fill out the requisite standard form, specifying the name of Cyril Kern. The Israelis asked the South Africans to enable I
sraeli detectives to interrogate Kern, in South Africa, about the money transfer. The Israeli authorities revealed their own inefficiency by admitting to the South Africans that they had no firm evidence that Cyril Kern in fact existed.
j When Sharon was asked by police detectives on April 22, 2002, about the sources of the funds that went through Annex, he reportedly replied: “The sources of their money? I never dealt with these financial matters. I think there’s one man who might know, and that’s Omri.” When the detectives pointed out that Omri was maintaining his right to remain silent, Sharon replied, “Look, Omri’s a big boy. He’s got to decide himself” (“The Sharon File,” www.news1.co.il, October 18, 2005).
k Cyril Kern played his part, too, when he was eventually tracked down by journalists in his high-walled home in Cape Town. The loan was a personal gift to help the family’s struggling ranch, he told a South African newspaper. “I loaned money to a friend and was very happy to do so.” He was not involved in Israeli politics “in any shape or form,” and the loan had been repaid with interest.
l The unconsummated flirtation with Sharon, coming on top of the electoral disappointment, left Mitzna unpopular with virtually everyone in Labor. Three months later he resigned as leader, replaced—ad interim of course—by the indefatigable Shimon Peres.
CHAPTER 15 · ABOUT-FACE
On March 13, 2003, Sharon’s bureau chief, Dov Weissglas, and his national security adviser, Efraim Halevy, found themselves hustled into the Oval Office. They were on a secret one-day mission to Washington to reassure administration officials that Sharon would not muscle in on the impending war with Iraq. But the president wanted to talk to them not about the war but about the push for peace in Palestine that he hoped would follow the overthrow of Saddam Hussein.