The Israeli economy shows signs of stress.…

The Israeli economy shows signs of stress.

A sharp devaluation of the shekel against the dollar in October forces inflation up from an annual rate of about four percent to an estimated nine percent.

Other economic indicators point to a deepening slowdown—growth in the third quarter was one point four percent, the lowest in a decade; investments are down by twenty-one point seven; and exports are down by eighteen point eight percent.

The most worrying statistic for the government is an unemployment figure of more than nine percent.

Netanyahu returns from Wye to face growing political trouble.

The Bank of Israel uses high interest rates in a dramatic effort to reduce Israeli inflation.

While the policy succeeds overall (the inflation rate is cut by two-thirds) it also precipitates a recession and rising unemployment, which hits hardest in the poorer sectors of society—notably the largely Sephardic residents of the development towns in the south.

Concurrently, the government's budget has been reduced, which hampers the prime minister's ability to satisfy the demands of the various coalition members.