Politics and Economics - Part II

As a continuation from the last post...
After the media announced that Sharon suffered a severe stroke, the stock market lost more than 5% in one day, and a lot of people feared that the market might lose more points.

Sharon ran a capitalistic government (which investors like) and was attempting to begin the process of ending the conflict with the Palestinians (which investors liked even more), and the uncertainty of the new situation caused a panic amongst them.
Ehud Olmert, along with leaders from the entire political spectrum, made sure that the stability of the government remains.

Olmert, acting prime minister and new Kadima leader is pro-capitalism and investors (mainly foreign) felt reasured while seeing him as Sharon's heir. After the 5% loss, the market bounced back during the last week is almost back at the starting point. This was reassurance that political system under Ehud Olmert's leadership is strong.

Both the Kadima leader and the Likud leader, Benjamin Netanyahu, are capitalists and they might form a coalition in the next government. Therefore, as it seems now, the next government's economics views will be capitalistic ones.
But it is too early to tell - elections are 10 weeks away.

Politics and Economics - Part I

Last week, elections within the Likud party took place. The elections were held in order to form the party's list of leaders for the upcoming national elections.
Likud had 40 (out of a total of 120) seats in the former parliament.
Ariel Sharon was the leader of that party, but left it along with other members to form the Kadima party about 7 weeks ago.

Prior to Ariel Sharon's stroke, surveys showed that the Likud only had 16 seats, while Kadima got 38. After Sharon's stroke, a lot of people thought that Kadima might lose power to Likud since Sharon was the founder and engine of Kadima. In last weekend's survey, Likud had 13 seats, while Kadima got 42 (!).

A lot of the credit for this goes to Ehud Olmert, the acting prime minister.
In the past week, Olmert made all the right decisions and showed the people that Kadima is much more than just Sharon, but the vision of many more leaders.

I'll talk about the influences of this regarding the economics in my next post.

The Israeli stock market review

In 2005, the Israeli stock market went up by more than 35% and reached its highest point ever (850 points) - it was a great place to invest.
One of the main events that contributed to the Israeli stock success was Ariel Sharon's disengagement plan, the Gaza strip pullout.
The Israeli military's unilateral withdrawal from the Gaza strip, along with the pullout of the Jewish settlements, gave the market a boost and created an optimistic atmosphere amongst investers.

In 2005 there was a major reform in the Israeli economy. The government reduced the tax on foreign shares and reduced the interest (two things that made investors look for other alternatives rather than put their money in the bank). There was a huge reform in the pension funds. Stanley Fisher, who has a big reputation amongst foreign investors, was nominated as Governor of the Bank of Israel.
These economic reforms helped the stock market to go up for the third year in a row.
Lets hope that 2006 will be the fourth...

Ariel Sharon

Ariel Sharon, the Israeli prime minister, suffered a severe stroke on the 4th of January. The media around the world has been covering the situation almost every hour since.

Israel and the Palestinians have been engaged in an ongoing conflict over land for over 35 years. The Gaza Strip and the West Bank are the main conflict areas. Most of the Palestinians live in these areas, and up till recently they shared it with Israeli settlers. The Gaza Strip contained 1.3 million Palestinians and only 8000 Israelis. Since 1967, Ariel Sharon was the main character who was responsible for building these settlements and encouraging Israelis to move and live there. This was one of the reasons that many people in Israel and around the world considered Sharon to be a right wing leader. This opinion on Sharon changed a few years ago.
Sharon took a brave turn towards the center of the Israeli political map and engaged the Gaza Strip pullout. The majority of the Israeli people supported this action and last August, Sharon ordered the army to leave Gaza and to evacuate all the Israelis from that area.
This action was considered to be a revolutionary event that gave hope to the Israelis and the Palestinians. The area saw the beginnings of peace, and the Israelis, along with leaders from around the world, believed that Sharon would be the leader to bring peace to the region.

Ariel Sharon started a new party for the upcoming election (which is supposed to take place on the 28th of March, 2006), which comprised leaders from both sides of the political map. Election polls showed that Sharon's party was massively favoured. Hope was in sight. And then, the unexpected happened -Sharon's stroke.

At the moment, he has gone through 3 brain surgeries and doctors are fearing for his life.
I hope he will be strong and recover from the horrible situation that he is in.
I don't think it is appropriate at this time to discuss the economic influence this event will have, although it will definitely have a short and long term influence that only time will tell.
I wish him all the best and hope to see him leading this country to a good future.

Israel's profile

Let me tell you a little bit about my lovely, active country - ISRAEL.
Israel is located in the Middle East and borders Egypt, Jordan, Syria and Lebanon.
Israel is a little country, about the size of San Diego, Slovenia, and only a little larger than the Kruger National Park in South Africa - not too big at all, but very dominant in world news.

Israel's population is approximately 7 million, comprising about 5 million Jews, 1.5 million Muslims and 0.5 Christians and others.

We have no oil wells that would enable us to export oil in order to richen our country's bank account, like other countries in the area. Nor do we have minerals to trade; all we have to rely on is our human resources.

Israelies, for the most part, are hard workers, talented and have creative minds. Of course, I'm not the most objective person in the world, but still, this combination helps us to compete with the biggest, most powerful countries in the world in many areas, such as agriculture, science, hi tech, anti-terrorism, military equipment, etc.

Well, that was a little taste of Israel. I know it's not enough, but you will hopefully understand more aspects from future posts.

Welcome

This blog is a peep hole into the Israel's economy.
I will try to update regularly about the upcoming events that might influence the market, answer questions, clear up issues, and of course, talk a little bit about myself.

More to come...