A Daily Analysis
By Marc Schulman

July 6, 2009 Israel and Iran, Netanyahu Zig Zags on Economic Matters

The Israeli news yesterday recounted foreign reports of the passage of an Israeli sub through the Suez Canal and the reported approval of the Saudis to allow Israeli aircraft to use their airspace should it attack Iran. The story of the Israeli submarine was confirmed by Israeli sources, while the Saudi agreement was dismissed by officials. Both leaks were clearly designed to send the message Israel was willing to take action against Iran. At the same time, Israeli media heavily covered the remarks by US Vice President Biden stating Israel was free to attack Iran, if it was convinced it was in Israelís vital interest, even if the US disagreed. This was seen by many in Israel as a green light for an attack. With events in such a flux in Iran, Israel is trying to insure nobody forgets the issue of the Iranian bomb. Despite all of the events in Iran in the last few weeks, there is no doubt work on the bomb was continued. What is not clear, is what effect the events will have on the militaristic foreign policy of the country. It could go either way.

Netanyahu was, once again, proven to be a leader who will cave in on a political issue when the pressure gets high. One of the key features of the Netanyahu economic plan was imposing Value Added Tax on Vegetables and Fruits. This was designed to help pay for Netanyahuís planned tax cuts for individuals and for corporations. There was criticism of the plan as "VAT" is a regressive tax and would hurt to poorest. Shas has been a vocal critic of the plan. In recent days Shas has threatened to pull out of the coalition if the tax law was passed. As of this afternoon, Netanyahu insisted the plan would go forward. This evening he announced the plan was cancelled.