Israeli Finance Minister Silvan Shalom indicated Israel's economy suffered more than $5 billion in losses for 2001. This number is one-fourteenth of the Israeli budget of $70 billion. Losses incurred due to the continuing Palestinian uprising now border on $15 billion.

The tourism sector has suffered a $2.2 billion loss in revenue since the beginning of Intifada. This is a 50 percent drop in Israel's tourism revenues. In Occupied Jerusalem alone five major Israeli hotels were closed down and 25 restaurants were forced to close their doors.

The number of tourists coming to Israel dropped in 2001 to less than 50 percent of the previous year. The Israeli national air carrier, El Al, has continued announcements of losses-forecasting $500 million in losses for 2001-2002.

The Israeli trade deficit has increased to more than $600 million, the highest in the Jewish state's history. Economists predict only a half percentage point increase in Israel's $24 billion-GDP for 2002.

Trade volume from Israel to the Palestinian National Authority (PNA) decreased by more than $500 million. In the Palestinian-ruled territories, losses are estimated at $8.5 billion since beginning of the Intifada in September 2000.

In the construction and agricultural sectors in Israel losses stand at $700 million and $150 million respectively. Nearly 12 percent of the Israeli workforce is unemployed. Foreign exports declined by 5 percent in 2001; a further 2 percent decrease is expected in 2002.

The average wage reduction in Israel for 2001 was 9 percent, going from an average of 7450 shekels ($1580) in the year 2000 to today's average of 6810 shekels ($1450). About 45 percent of those unemployed worked in the tourism industry where hotels and restaurants continue to discharge more and more staff in an effort to stem mounting losses.

David Klein, the Bank of Israel's governor, predicts a murky future for the Israeli economy. In public statements he has indicated the Sharon government needs to make cuts in its fiscal budget for 2002 of a suggested $5 billion to reduce the now inflated deficit. Klein saying, "Sharon's government needs to take bold measures to contain the repercussions of the Palestinian Intifada on the economy." Klein's words provoked controversy among Israeli cabinet ministers who complain of his attempts to manipulate the Israeli economy.

Both Sharon and Shalom proposed a bill two weeks ago to limit Klein's independence and dictate different foreign exchange rate policies. The bill, still a blueprint, intends to establish a government-led monetary council that will take over control of the now largely independent financial sector in Israel and create a more government-sanctioned methodology.

Israeli currency, the shekel, has continued to plummet, losing more power in exchange markets. Current exchange rates put the shekel at around 4.6 to the US dollar-a 22 percent decline since Sharon came to power.

Israeli economists readily admit US financial aid is the chief and foremost factor sustaining the Israeli economy. Currently Israel's foreign aid is estimated at around $8 billion. This constitutes fully one-third of Israel's GDP. Since 1948 Israel has received some $43 billion in US aid.

The Israeli government has maintained its decision to freeze $2 billion in PNA monies. The Israeli Finance Ministry collected this money as tax payments on behalf of PNA officials. According to the Oslo Accords Israel must collect taxes and duties for which the Palestinians are entitled and then transfer this money to the PNA treasury.

Calls have been heard recently from Israeli Knesset members to transfer the frozen funds to pay Israeli firms and compensate Israeli families who lost relatives in the Intifada.

Israeli economists believe such ideas and other suggestions floated by Sharon's government indicate a degree of fanaticism and desperation in facing the continuing economic difficulties. They warn any further impasses in diplomatic efforts to reduce the violence between Israel and the Palestinians will most assuredly lead to even greater negative developments in Israel's economy.