CABINET COMMUNIQUE
(Communicated by the Cabinet Secretariat)
At the weekly Cabinet meeting today (Sunday), 12.10.08:

1. Finance Minister Ronnie Bar-On briefed ministers on the Israeli economy
in light of the global economic crisis.

Bank of Israel Governor Prof. Stanley Fisher seconded Finance Minister
Bar-On's remarks and added (inter alia): "We have a very responsible budget.
We have a current account surplus in the balance of payments. This means
that we do not need to request dollars from anyone. We have a relatively
strong and conservative banking system, which is the core of stability in
the financial system."

National Economics Council Chairman Prof. Manuel Trajtenberg noted that the
relative situation of the Israeli economy is currently much better than most
Western economies. He said that, "We are suffering only from the shockwaves
of a crisis that is occurring elsewhere. What concerns me are the calls for
immediate action. As of now, restraint is necessary, not hasty measures."

Prime Minister Ehud Olmert said: "Since the outbreak of the crisis,
especially in the last two-to-three weeks, no day passes without my holding
intensive consultations with Finance Minister Bar-On, BOI Gov. Fisher and
senior economic officials.

I reported on all the assessment developments regarding the Israeli economy.
The major steps to safeguard our economy, especially against the effects of
global developments, were taken a long while ago by the Finance Minister and
the BOI Governor, and were approved by the Government. The Israeli economy
has been managed responsibly, reasonably and there are those who would even
say, conservatively. In retrospect, today everyone acknowledges that
conservatism is sometimes an advantage and not a disadvantage, and it seems
to me that this level-headedness has now borne positive results. We did not
breach our [budgetary] framework; we did not go wild; we passed budgets on
time; we assisted the economy's expansion; encouraged exports and lowered
unemployment. I think that all members of the Government should be
satisfied by the fact the Finance Minister and I insisted on passing the
budget when we did. There is no doubt that passing the budget in the
Cabinet, in the disciplined framework which we decided on, contributed to
the sense of stability and strength of the Israeli economy as compared to
the developments that we have seen in other places. There should be no
doubt that there would have been no way to minimize the effects of the
global crisis had the Government not implemented this cautious and
restrained policy over the past three years.

We must continue to insist on our goal of safeguarding and assuring the
financial strength of the Israeli economy. The emphasis is on the banking
system, which is very stable, in which we have great trust, and on provident
and pension funds. There is no reason for anxiety and there is no reason
to act unreasonably or irrationally. If we continue to behave responsibly,
the Israeli economy will be able to overcome the possible effects of the
crisis occurring in the world economy."

2. Prime Minister Olmert offered condolences to Health Minister Yaakov
Ben-Yizri over the passing of his wife.

3. Public Security Minister Avi Dicter, Israel Police Inspector-General Dudi
Cohen and senior Israel Police officers briefed ministers on events in Acre
from 8.10.08 until today.

Prime Minister Olmert said: "In general, the scenes from Acre, since Yom
Kippur, and in the past few nights, have been very sad and worrying. They
are sad because, for many years, Acre has excelled vis-a-vis coexistence
between Jews and Arabs in a mixed city, which gives hope for Acre's
prosperity and growth. There is a sense that very many Acre residents have
become hostages to small groups of extremists - Jewish and Arab - on both
sides, and the result is violence, fanaticism and a loss of a sense of
proportion in the context of the friction that is liable to occur - and does
occur - on occasion between residents of any city, especially a mixed city.

The need for mutual respect and patience among Jews and Arabs in the State
of Israel in general is a subject that has long concerned me. We have made
great strides in the past year to create a process, a dialogue, between the
leadership of the State of Israel and the leadership of the Arab population
and, via the latter, the Arab population itself, in order to create a
situation in which we moderate extreme positions, reduce friction and create
a process of dialogue built on the belief that there is no alternative to
living together amidst mutual respect and tolerance. I am convinced; I
believe with all my heart, that the State of Israel has no alternative.
This has nothing to do with the political and diplomatic issues between us
and our neighbors. This has to do with the fact that a national minority
comprising almost 20% of the population of the state lives in the State of
Israel and this minority must find space for itself within which it can be
part of the population. However, but it is part of the rules of life that
prevail in a democracy, as we believe that we have and need to have.

We will continue to make efforts in this direction. On the other hand, the
Israel Police has been instructed in recent days to show zero tolerance
toward acts of violence and it will do so."

4. Prime Minister Olmert briefed ministers on his recent visit to Russia:
"As you know, I visited Moscow last week as the guest of Russian President
Dmitry Medvedev. Our talks were very interesting. This was an opportunity
to meet President Medvedev and better understand how he views Russia's
interests in various areas, especially those closest to us, including those
in which we are threatened. Naturally, I stressed Israel's concern over the
destructive effects that supplying Russian weapons to countries in potential
friction with Israel - both our neighbors and those a little farther away -
could have. This could upset the balance in our region and lead to
unpleasant developments.

I came away encouraged although, naturally, I refused to go into details why
this was so. I am pleased that I could read in the international media, in
the past three days, about an apparent trend in the Russian administration,
to the effect that, according to official reports from there, new Russian
weaponry, about which we are especially anxious, will not be sold to regions
in distress, with specific reference to Iran and Syria. I think that if
this is indeed the case, as is apparent from Russian statements, this is an
outcome that we can look forward to."

5. Tourism Minister Ruhama Avraham-Balila and Tourism Ministry
Director-General submitted their ministry's interim report on promoting
bicycle riding in Israel.

6. The Cabinet discussed the issue of quotas for foreign workers employed in
ethnic restaurants.

7. The Cabinet discussed the preservation and rehabilitation of the Neve
Ilan historic site in memory of the late Tourism Minister Rechavam Zeevy.

8. The Cabinet discussed Finance Minister Bar-On's appeal against the
Ministerial Social Welfare and Social Services Committee's decision to adopt
the findings of an interministerial report on the issue of state
responsibility for assuring the nutritional security of its citizens. The
Cabinet will take up the issue again in approximately two weeks.