dent, viable, contiguous, democratic Palestine can live side by side in peace and security”
. But there are many differences between the two sides
economic, histori-cal, cultural and religious
and Israel continues to establish new settlements that are helping undermine the prerequisites for constructive peace negotiations.
Do the Israelis really want peace instead of gaining access to more land
and do the Palestinians really want their own state?
If Israel and Palestine can reach agreement, the EU
which is Israel’s largest trade partner, buying 30 per cent of its exports
and others offers the prospect of political, economic and security policy support to both sides, as well as greater access to the European market. The security policy situation poses major challenges to the region.
For Israel in particular, there are four areas that will determine stability in the near term
. Aside from the
conflict with Palestine
, Israel can expect
developments in Iran
to influence its situa-tion; the thaw between Iran and the international com-munity will enable Iran to continue developing nuclear technology, which many view as an opportunity for Iran also to develop nuclear weapons technology. This may change the balance of power in the region in a new and destabilising way. In addition, uncertainty about the next stage of the
is also a factor than will have an impact on Israel’s future role in the region. The fourth area that will determine the stability of the region – and affect Israel – is
the probable shift in US involvement in the Middle East
. Increasing US ener-gy independence (shale gas/oil) is expected to result in a reduced American presence in the Middle East and an increased focus instead on Southeast Asia, a region of growing economic importance to the US and the world. This would create a political vacuum that
in light of the prevailing instability
needs to be filled by some-one else. It is in the interest of the world, and of course also the US, that the Middle East should undergo stable development, but from an economic standpoint it is perhaps mainly China that may need to assume a more active political role, a task for which
to put it mildly
China is untested.
Israel’s balance sheet gets high marks
Israel’s economy has shown impressive resilience to the 2008-09 global recession as well as the geopolitical un-certainty that continues to dominate the situation in the
can be found in
strong macroeconomic fundamentals
, including a surplus in Israel’s external transactions (current account), compa-ratively
low government debt
banking system with limited global linkages
. Over the past decade,
has fallen from 14 to 6 per cent without creating upward pressure on wages and salaries, which continue to grow by about 3 per cent annually. Israel’s labour market can be descry-bed as flexible, with a decentralised wage formation model. Inflation is restrained and under control within the central bank’s target interval of 1-3 per cent. The
economy is growing
by about 3.5 per cent year-on-year; this is also the forecast for 2014 and 2015.
is on its way down and is below 70 per cent of GDP today. The government’s target is to bring debt down to 50 per cent of GDP by 2020. This will be achieved both through
(income and cor-porate taxes have been raised) and
lower public ex-penditures
, which are allowed to grow according to the “fiscal rule”: a rate of increase equivalent to yearly population growth (today 1.7 per cent) plus one per-centage point. Israel has 7.7 million residents – 60 per cent under the age of 25 – with an estimated 20 per cent of them living in relative poverty. However, the average living standard is high and GDP per capita is in 40
place in the world.