community laid the blame for economic recession in equal measure
on his sabotage of the peace process and his espousal of the
monetarist dogma. The stalled peace process continued to take its
toll on the Israeli economy. In October 1998, the Finance Ministry
had reported that 1998 had been Israel’s worst year in the past
decade, with real foreign investment in the Tel Aviv stock exchange
down to 73 per cent for the first six months, according to the Bank
of Israel. The Central Bureau of Statistics had reported a
‘considerable’ economic slump in the second half of 1998.
As the countdown for the general election of 17 May began,
Netanyahu stepped up his efforts to woo right-wing voters. His hard-
line Foreign Minister Ariel Sharon, within weeks of the Wye
Memorandum’s signing, had publicly called upon settler groups to
‘grab’ as much West Bank land as possible to prevent it from
remaining in Arab hands. On 9 January, Netanyahu threatened to
annex the bulk of the West Bank if the head of the PA, Yasir ‘Arafat,
declared Palestinian statehood when the Oslo process expired on 4
May. Netanyahu’s tough rhetoric was combined with the escalation
of settlement expansion in the West Bank and East Jerusalem. In
early January, he gave the go-ahead for the construction of the Har
Homa settlement at Jabal Abu Ghunaym on Jerusalem’s southern
outskirts, a step which triggered fierce Palestinian opposition. The
new settlement will effectively complete the cordon of Jewish
settlements around East Jerusalem, virtually cutting off the city from
the rest of the West Bank. Jabal Abu Ghunaym was one of several
settlement expansion schemes the Israeli government was putting
into effect, to take advantage of the election atmosphere in Israel.
Since the Wye agreement was signed, Israel had established 17 new
‘hilltop’ settlements in the West Bank, all located close to areas slated
for transfer to the PA under the terms of Wye. Their aim was not
only to swell the West Bank settler population from its current
160,000 to a potential 200,000, but also to enclose the existing
Palestinian autonomous areas to prevent their expansion much
beyond the 10 per cent of extra territory granted them in Wye’s
‘second further redeployment’, if and when implemented.
On 17 May, the Israeli electorate summarily booted the incumbent
Prime Minister Netanyahu out of office and elected One Israel Party
leader Ehud Barak, a former army chief of staff, in his place. Barak,
of the opposition Labour Party, won the prime ministerial elections
by a landslide, taking 56.8 per cent of the vote compared to 43.1 per
cent for Netanyahu. In the second ballot to the Israeli Parliament,
Zionist Revisionism and the Likud 103