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Headlines Extract - The Australian
David Uren, Economics Correspondent
Wednesday, October 1, 2008

Central banks worldwide struggle to stop the credit crisis from triggering a global downturn. Monday's shock defeat of the US Government's $US700 billion Wall Street bailout sent stock markets into meltdown. In New York, the Dow Jones industrial average suffered its biggest points fall - a 777 point rout that wiped more than $US1 trillion from the value of listed stocks - after a bitterly divided US House of Representatives blocked the emergency bailout. There was an early bounce Tuesday morning (U.S. time), with the Dow opening 192 points up at 10,558.

Negotiations on the rescue package, which involves the US Treasury buying the mortgage assets of distressed financial institutions, started immediately after the vote, with a "disappointed" President George W.Bush summoning advisers to the White House. In an address to the nation on Tuesday, Mr Bush said the failure of the bill was "not the end of the legislative process". Congress faced the choice between "action and the real prospect of economic hardship for millions of Americans", he said, adding that the economy was depending on decisive action from the Government.

Democrat house Speaker Nancy Pelosi vowed to get back to work on passing a new bill to rescue the economy. But the house will not meet again until Thursday morning (U.S. time), because of the Jewish holiday Rosh Hashanah, leaving world financial markets in limbo.

Distances:Tel Aviv to Jerusalem 63 kms
Tel Aviv to Haifa 95 kms
Source: Atlas of the Arab-Israeli Conflict, 7th edition - Sir Martin Gilbert;
Publisher: Routledge (Taylor & Francis), 2002;
ISBN: 0415281172 (paperback),
0415281164 (hardback); Map: NPR Online

Shifting ground to seek peace
The Australian
Abraham Rabinovich, Jerusalem
Saturday, October 04, 2008

AS a young member of the Israeli Knesset (parliament), Ehud Olmert voted against Israel's peace agreement with Egypt in 1979, defying his party leader, prime minister Menahem Begin. As mayor of Jerusalem from 1993 to 2003, he provocatively pushed the construction of housing for right-wing Jewish settlers in the heart of Arab neighbourhoods. This week, as he prepared to step down as Israel's Prime Minister, Olmert rejected the right-wing views he long championed and asserted that total, or near total, withdrawal from Palestinian and Syrian territory captured in the 1967 Six-Day War was the only rational choice for the nation. "We have to make a decision, one that goes against all our instincts, against our collective memory, against the prayers of the Jewish people for 2000 years," he said in a farewell interview with the newspaper Yediot Achronot.

Olmert formally submitted his resignation as prime minister last week in the wake of police investigations into corruption charges against him but continues in office until a successor is chosen. To achieve peace with the Palestinians, he said, "Israel must withdraw from almost all, if not all" of the West Bank. "No Israeli leader has said this before me." Israel would retain a small percentage of land for existing settlement blocs, Olmert said, but it would have to transfer to the Palestinians a similar amount of Israel's land in compensation. "Without this, there will not be peace."

According to the Israeli press, Olmert has offered to withdraw from 98.1 per cent of the West Bank and to compensate the Palestinians by giving them an equivalent amount of Israeli land abutting the Gaza Strip. The highest previous Israeli offer was a return to the Palestinians of 94-96 per cent of territory with only partial territorial compensation for land lost on the West Bank. The territory vacated by Israel, Olmert said, must include Arab East Jerusalem, which the Palestinians are demanding as their capital. The holy places in Jerusalem's walled Old City would require "special arrangements", presumably international control. Preservation of Jerusalem as a "united city" under Israeli sovereignty had been a key Israeli political mantra since the 1967 war. In the past few years, that view has been challenged by a growing number of voices in Israel. With the Yediot Achronot interview, Olmert placed himself, with the prestige of a former mayor and prime minister, at the forefront of the divided city camp.

"I had wanted to impose Israeli sovereignty over the entire city," Olmert said. "I admit it. I'm not trying to retroactively justify what I did over 35 years. A substantial part of that time I was not willing to look at reality in all its depth." To maintain Israeli sovereignty in East Jerusalem, Olmert noted, would damage Israel demographically by permanently incorporating its 270,000 Palestinian residents.

As for Syria, Olmert said, peace was achievable at a clear price. "Is there any person in Israel who believes that peace with Syria is possible without giving up the Golan ?" Israel has informed Syria what it must do to get the Golan back, he said. "They must give up their connection with Iran as it exists today", a phrasing that implies Israeli readiness to accept continued diplomatic relations between Damascus and Tehran as long as it is not a strategic, anti-Israel, alliance. Previous Israeli statements had implied a demand that Damascus completely sever ties with Tehran. In addition, Damascus would have to give up its support for Hezbollah in Lebanon and of Hamas in the Palestinian territories.

Olmert's would-be successor as prime minister, Foreign Minister Tzipi Livni, has made an almost identical ideological U-turn as Olmert from hawk to dove in recent years. Both their fathers served as right-wing Knesset members aligned with Begin. Both inherited the vision of a Jewish state stretching from the Mediterranean Sea to the Jordan River, without any sharing of territory with a Palestinian state. Livni, speaking recently of her ideological journey away from her political roots, said, "I reached my own conclusion that there is a need to divide the land." Olmert came to the same conclusion. Olmert and Livni followed prime minister Ariel Sharon when he broke away three years ago from Begin's Likud to establish the Kadima Party after Likud baulked at his proposal to evacuate Israeli settlements from the Gaza Strip.

Sharon himself had a political epiphany. In various ministerial positions, he had built scores of settlements in the West Bank and Gaza through the years in an attempt to prevent the creation of a Palestinian state. As prime minister, however, he came to accept that Israel could not have peace if it did not allow the creation of a Palestinian state. In view of Olmert's previous dire warnings directed at Iran's nuclear program, he was surprisingly low-key in the interview regarding the much mooted possibility of an Israeli attack on Iran's nuclear facilities. "Iran is a very large power that is a concern for the international community. We've lost our sense of proportion regarding our (capacity to deal with the problem alone). Let's be more modest."

Olmert has in recent years hinted at a revised world view but this week's interview is the first time he has expounded it so bluntly. He accused the Israeli power establishment, present and past, of thinking tactically rather than strategically and of refusing to take the bold mental leaps required to achieve meaningful change. He noted, for instance, objections by many to withdrawal from the Golan because of fear that Syrian tanks would descend into Israel, something which almost happened in the Yom Kippur War. Today, he noted, there are other ways to halt such an attack, a reference to attack helicopters. "I read what retired (Israeli) generals write and I say how can it be that they never learn anything and never forget anything. They're still talking about high ground and low ground, this hill or that hill. All that is valueless. A few days ago I sat in a forum with central decision makers and listened to them attentively. When they finished, I said, 'It's not personal, but when I listen to you I understand why we haven't achieved peace in the past 40 years and won't for the next 40.'

"When I look at past prime ministers, I see that Sharon, (Benjamin) Netanyahu, Ehud Barak, even Yitzhak Rabin, all took steps leading in the right direction but all stopped short at a crossroad where a decision was required. The decision didn't come." An exception, said Olmert, was Begin who, despite his own hawkish disposition, dispatched his foreign minister, Moshe Dayan, to meet an emissary from Egyptian president Anwar Sadat. "Dayan began from the end. He first told (the Egyptian) that Israel is prepared to withdraw from all Sinai. Now let's begin negotiations."

If Livni is able to form a government within the next six weeks, she will assume the prime minister's post. If not, elections will be held, probably in February. Until then, Olmert will continue to serve. He said he would like to remain active on the peacemaking front as long as he holds office. The Syrians and Palestinians have made it clear, however, that they are waiting for his successor. Although Olmert's remarks are unlikely to have any tangible effect on events, they may well influence the tone of political discourse in Israel, making concessionary positions more mainstream.


Top EU leaders in rescue bid

EU leaders in rescue bid
Italy's Silvio Berlusconi, left, Germany's Angela Merkel, France's Nicolas Sarkozy and Britain's Gordon Brown in Paris EU rescue bid

PARIS: Europe's four major powers have vowed to do all they can to prevent the US financial turmoil from destabilising their banking systems, even as a E35billion ($62 billion) plan to save a German lender fell apart. The leaders of Europe's largest economies, France, Germany, Italy and Britain, announced a multi-billion-euro fund to support small businesses yesterday while calling for a summit to redefine the world's financial order.

French President Nicolas Sarkozy, who hosted the weekend talks, said the four leaders had agreed to punish failing bank executives and to call for an urgent meeting of the Group of Eight world industrialised powers to marshall a global response to the financial crisis. Crucially, however, the meeting failed to agree on the more ambitious '300 billion European rescue fund that was proposed last week in the run-up to the Paris summit. The four leaders pledged to co-ordinate national responses to help banks in distress, but their failure to agree on an EU-wide regime reflects the divisions in Europe on how to deal with the crisis washing up on its shores from the US.

Both Ireland and Greece angered their EU neighbours last week by acting independently and guaranteeing to protect all savings held in their national banks. While the decision propped up the Irish and Greek banks, it immediately made other institutions appear less safe. Money began to flood out of other European banks and into Ireland. One London economist said of the Irish action: "Frankly, it was truly an exceptionally stupid thing to do." The four leaders yesterday issued a rebuke to Ireland. German Chancellor Angela Merkel said: "We have requested the commission to enter a dialogue with Ireland. It is important to have a balanced approach with no undue disadvantages for any member states."

European nations remain divided on how to safeguard their citizens' bank deposits and rescue failing institutions. Adding to the disarray, the president of the European parliament said the Paris meeting had no power to take EU-wide decisions. The Saturday afternoon summit was arranged hastily with the aim of reassuring jittery markets and investors.

On Friday (local time), US legislators approved a US$700billion ($905 billion) government plan to buy up bad debts from US banks and help to unfreeze lending. The four European leaders - Mr Sarkozy, British Prime Minister Gordon Brown, Ms Merkel and Italian Premier Silvio Berlusconi - vowed to ensure the soundness and stability of Europe's banking and financial system, but gave few specifics.

Instead, they took a swipe at European subsidy rules (originally) designed to ensure fair competition by preventing governments propping up failing companies. Given the "exceptional circumstances", they said, EU regulators should be flexible on the laws that restrict how much governments can give to companies in trouble. European countries have pumped billions of euros into their banks to keep them afloat over the past week, trying to assure savers their money was safe and to avert a panic that has frozen lending across the world.

The latest institution to run into trouble was Germany's No2 commercial property lender, Hypo Real Estate Holding AG, when the '35 billion bailout unravelled on Saturday. A consortium of banks was to have led the biggest rescue in German history, and its failure could wreak havoc when financial markets reopen today. German Interior Minister Wolfgang Schaeuble has warned that the financial crisis could have political repercussions, noting how Adolf Hitler rose to power after the 1929 Wall Street crash. "The consequences of that depression was Adolf Hitler, and indirectly World War II and Auschwitz," he was quoted as saying in the newspaper Der Spiegel.

At the weekend summit, the four leaders said they would target the "golden parachutes" that allow chief executives of failing firms to walk away with millions in bonuses. Mr Sarkozy said all four nations "pledged that in cases of public support to banks in difficulty, the managers will be punished, and shareholders as well will bear some of the consequences". They vowed to help small companies seeking credit by speeding up the release of '30 billion in loans from the European Investment Bank.

Mr Sarkozy suggested that, with the US focused on next month's presidential election, it was important that Europe act to reshape a more responsible global economy. "We want to put down the foundations of a capitalism of the entrepreneur and not of the speculator. We want transparency, we want moralisation. We want the creation of value. We want people to have confidence," he said. Mr Brown agreed: "Where action has to be taken, we will continue to do whatever is necessary to preserve the stability of the financial system. "The message to families and businesses is that, as our central banks are already doing, liquidity will be assured in order to preserve confidence and stability."


Britain poised to go it alone with bank bailout
The Australian
Francis Elliott and Christine Seib
Additional reporting: The Wall Street Journal
Tuesday, October 7, 2008

AN emergency plan to pump billions of pounds of taxpayers' cash into Britain's banks emerged yesterday as the global financial crisis deepened. In Germany, Angela Merkel, the Chancellor, buried any remaining semblance of a unified European response by guaranteeing individuals deposits in an effort to avert a crisis of confidence in the nation's banks. Ms Merkel, who with British Prime Minister Gordon Brown led calls on European Union members to resist unilateral action, guaranteed private savings as the German Government arranged a bailout for Hypo Real Estate Holding, a giant property lender that came close to collapsing after private lenders pulled out of an earlier E35 billion ($63.5 billion) aid plan last week. The German deposit guarantee came as financiers and politicians secured a last-ditch E50 billion rescue of Hypo Real Estate, one of the country's largest lenders. German's move to guarantee deposits put further pressure on Mr Brown to follow suit after the Irish Republic and Greece offered similar assurances last week.

Denmark also guaranteed all bank deposits as part of a deal with banks to set up a 35 billion kroner ($8.5 billion) liquidation fund. The governments of Belgium and Luxembourg also arranged a deal under which French lender BNP Paribas will take over the Belgian and Luxembourg operations of Fortis for E15 billion in cash and stock. The deal for the Dutch-Belgian-Luxembourg insurance and banking giant came after a previous rescue plan last week failed to prevent an exodus of customers, and The Netherlands nationalised the Dutch wing of the company. In Italy, meanwhile, the board of banking giant UniCredit announced that it would launch a E6.6 billion emergency capital increase.

The British Treasury insisted that there was no change in the British scheme, which underwrites deposits up to pound stg. 50,000 ($117,000). However, Chancellor Alistair Darling hinted yesterday that the Government could use public funds to take stakes in many, if not all, of Britain's banks to help restore the system. The Chancellor, who was due to make a Commons statement on the banking crisis overnight, said the Treasury would do whatever it took to help out banks in the short and medium term. Although Treasury officials insisted that Mr Darling's statement would not contain any specific proposals, they confirmed that contingency measures were under discussion. "I want to make it clear that we will do whatever it takes not only to stabilise the system but to help going forward, and that means perhaps some pretty big steps that we wouldn't take in ordinary times," Mr Darling said.

The worsening financial crisis will increase pressure on the Bank of England to cut the British base interest rate from 5 per cent when the central bank's Monetary Policy Committee meets on Thursday. Mr Darling was asked yesterday if he had a list of banks that may be in trouble, but he declined to name any. He said the Treasury was constantly monitoring the situation, not just in Britain but around the world. Britain's banks are likely to fight any attempt to semi-nationalise the banking sector. Forced recapitalisations could involve the Government buying newly issued shares in the banks, taking a minority stake in the companies. Such a move would be hugely unpopular with existing shareholders, who would see their own investments devalued as a result of the Government buy-in.

Britain's banks insist that they have enough cash to cope with a worsening economy. In the past six months, they have raised more than pound stg. 20 billion from shareholders to bolster their balance sheets. This cash is used to protect them against rising bad debts. The banks argue that their real problem is liquidity. The market in which banks lend to each other at wholesale prices has dried up as banks hoard their cash in case problems worsen. Because they cannot borrow as much as usual in the wholesale market, banks have had to cut back on lending to customers. They insisted yesterday that recent moves by the Bank of England appeared to be sufficient to loosen up the wholesale market, meaning that more funds would be made available to retail borrowers.

Writing in The Times, Andrew Tyrie, a Conservative MP and former Treasury adviser, said forcing all banks to recapitalise would solve the liquidity problem more quickly than could be achieved by the Bank of England's cash injections. The suspicion is growing that the fundamental cause of the freeze-up of the interbank market is not just temporary concerns about liquidity but deeper worries about the solvency of some of the banks, he writes. A banking bill to make full rescues like that of Northern Rock and Bradford & Bingley easier was expected to be introduced in parliament overnight.

The patchwork of measures in Europe all came less than 24 hours after the leaders of Europe's four largest countries pledged after a meeting in Paris to protect the continent's financial system. "We are taking a solemn commitment to back banking and financial institutions," French President Nicolas Sarkozy said at a news conference after Saturday's summit. In the US, fed officials have taken aggressive actions in recent weeks to try to alleviate the severe pressures weighing on damaged short-term funding markets. New measures from the central bank are likely in the days ahead. It is not yet clear exactly what steps the Fed will take, but it could be aimed at commercial-paper markets, which have been damaged by skittishness among money-market funds, a big investor in this asset class.

The crisis in Europe now has broadened from the implosion of US mortgage-related assets to a mounting unwillingness among European banks to lend to one another and a growing loss of confidence among investors and in some cases depositors. Adding to the predicament, governments from Ireland to Germany are trying to reassure their increasingly anxious voters. Other European banks could face similar funding strains to those of Fortis and Hypo, requiring public or private financial aid, as investors avoid making the kind of short-term loans that banks depend on for funding.

In a sign that banks' borrowing costs are rising, the euro London interbank offered rate, or Libor, a measure of the rates at which banks lend to one another, hit 5.33 per cent on Friday compared with 4.95 per cent on September 1. The frantic and disparate moves in Europe raise questions about whether European governments, regulators and bankers have a comprehensive approach to addressing the deepening financial crisis. Some of Europe's largest economies are already flirting with recession.

"It's been a shocking reality check for everyone, and the specter of a vicious downward spiral of financial conditions and economic growth has now taken a very definite and concrete shape in everyone's mind," UniCredit global chief economist Marco Annunziata told clients in a note. Mr Annunziata's note was not directly referring to UniCredit's situation.


Extract - Rates cut around the world as Britain launches trillion-dollar bailout
The Australian
David Uren, Economics correspondent
Thursday, October 9, 2008

THE world's major central banks last night followed the Reserve Bank of Australia and cut interest rates in a co-ordinated effort to ease pressure on a still gridlocked global financial system. Rate cuts by the US Federal Reserve, Bank of England and central banks in China, Europe, Canada, Sweden and Switzerland followed a $1.23 trillion rescue package in Britain which included the part-nationalisation of England's eight biggest banks.

Within hours of the British bailout being announced, the Bank of England cut official interest rates by 0.5 of a percentage point to 4.5 per cent as part of the co-ordinated global effort. The US Fed reduced its key rate from 2 per cent to 1.5 per cent. French President Nicolas Sarkozy said co-ordinated action was the only way to confront an "unprecedented financial storm". As part of the $1.23 trillion rescue package, the British Government said it would invest pound stg. 150billion ($364.3 billion) directly into banks, establish a pound stg. 200billion special liquidity fund and guarantee pound stg. 250 billion of bank-to-bank loans.

Despite the rescue package, the London market fell 6.5per cent in early trading, before recovering to be down just 2 per cent by the afternoon. On Wall Street today, the Dow opened 196.09 points (2.08 per cent) down at 9251.02. This followed a cascade of losses on other markets, led by Tokyo. Japanese Prime Minister Taro Aso said the plunge on the Tokyo stock market was "beyond our imagination" after it shed almost 10per cent, adding that he sensed "huge fears" in the public. In Australia, the share market had one of its worst days on record, diving 230 points or 5per cent to close at 4388 points, following sharp losses on Wall Street overnight. The market has now lost 12.5per cent of its value in two weeks.

The IMF's Mr Blanchard said the essence of a functioning financial system was trust. "I will lend to you if I can reasonably expect you will repay me later. That trust is largely gone." The US Federal Reserve's decision to start supporting business short-term lending follows a seizure in the commercial paper market, with many of the US's largest corporations unable to arrange funds for basic working capital. Australian companies exporting to the US face orders being cancelled because importing companies cannot get credit. While the IMF rates Australia's prospects better than other advanced countries, currency markets have taken a harsh view, with Australia, along with Korea, having the worst performing currencies. Both nations have large current account deficits. The Australian dollar, which had held above US70c for most of the day, plunged to US67.5c at about 3.30pm. "The Australian dollar is even losing ground against the Kiwi. This feels like a meltdown," ANZ chief currency strategist Tony Morriss said.

Comment by Christian Kerr, columnist

Let's not mince words here. Politicians who blame banks for this crisis are as sophisticated as those blokes who blame the woman for getting pregnant. US financial institutions were encouraged to make loans to people who should not have got them under threats they would be fined (if they didn't) for discrimination. Thus the two major institutions, Freddie Mac and Fannie Mae were pressured by Democrats in Congress to take on billions of dollars of securities backed by sub-prime loans. Wall Street simply responded to this bit of social engineering by creating products. Things went bad.


Rioting hits Israel - Unrest on Jews' holiest day
The Australian
Abraham Rabinovich, Acre, Israel
Saturday, October 11, 2008

A CAR driven through a Jewish neighbourhood in this city by an Israeli Arab on Yom Kippur, the Jews' holiest day, touched off the worst Jewish-Arab rioting inside Israel since the outbreak of the Palestinian intifada eight years ago. Hundreds of residents of this ethnically mixed city clashed for two successive nights, leading to fears that similar rioting might spread to other parts of the country. Police poured reinforcements into Acre and Prime Minister Ehud Olmert issued a call for restraint by both sides. "We must safeguard the ability to live together in mixed cities," he said.

On Yom Kippur, the Jews' day of fasting, cars are not driven on the streets of Jewish towns except for emergency vehicles. Even those Jews who do not spend the day in synagogue, as do the religiously observant, refrain from playing radios loudly or otherwise disturbing the silent solemnity of the day in public. Arabs traditionally show respect for the day by not driving into Jewish areas.

On Wednesday night (local time), however, an Arab resident of Acre, Taufik Jama, drove through a Jewish neighbourhood with his 18-year-old son and a friend of the son close to midnight. Jama said afterwards he was going to a relative's apartment across town to pick up his daughter. When he reached his destination, he said, he and his two passengers were attacked by Jewish youths and barely managed to escape. A police spokesman, Chief Superintendent Eran Shaked, dismissed Jama's version. "This was a provocation," he said. "An Arab driver enters a Jewish neighbourhood on Yom Kippur with blaring music (on the car radio) and refuses to leave when asked to by local residents. We believe he was intoxicated." Jama denied that he had been playing the car radio.

Rumours that an Arab had been lynched reached the Arab quarters and hundreds of Arabs began marching towards the Jewish side of the city, smashing shop windows and car windows along the way. They were met by crowds of Jews and the two sides hurled rocks at each other while exchanging shouts of "Death to the Arabs" and "Death to the Jews" as police tried to intervene. Police commanders met Arab leaders in an attempt to restore calm but rioting broke out again yesterday. Police used water cannon and teargas to pry the sides apart. Eight people were injured and several arrests were made.

The rioting was the worst inside Israel since September 2000, when 13 Israeli Arabs were shot dead as they blocked main roads and rioted in support of the Palestinian uprising in the West Bank and Gaza. Right-wing Knesset member Esterina Tartman said yesterday the Acre riots justified demands to transfer some Arab areas inside Israel to an emergent Palestinian state in a territorial swap. "The Arabs of Israel are the real threat to the state," she said. Arab Knesset member Ahmed Tibi termed the incident a "Jewish pogrom" against Arabs.

The ancient walled city at the heart of Acre, which contains significant remains from the Crusader period, is inhabited almost exclusively by Arabs, who constitute about one-third of the city's population. Jewish inhabitants live in new neighbourhoods outside the walls. A four-day theatre festival, an annual feature that is one of the liveliest cultural events in Israel, is scheduled to be held next week inside Acre's old city. It is not clear now whether it will be in view of the ongoing tension.


Brown sets pace on global regulation
The Australian
Correspondents in Brussels - The Times, agencies
Friday, October 17, 2008

BRITISH Prime Minister Gordon Brown hijacked the European Union summit in Brussels yesterday, calling for the most ambitious reform of the world economic order since World War II to prevent a repeat of the current economic crisis. The new spring in Mr Brown's step was much in evidence as he upstaged his fellow leaders by arriving first, and fitted in two press conferences before the summit even began.

He called for dozens of world leaders to meet for a summit to rewrite the rules of international capitalism that have stood since 1944, when the current world financial and economic system were laid at Bretton Woods. Led by Franklin D.Roosevelt, Western leaders created the International Monetary Fund and the World Bank and laid down common standards for open markets around the world. Calling for "very large and very radical changes", Mr Brown said he was seeking nothing less than "a new Bretton Woods". The recent crisis proved the need for much more international co-operation on the regulation of banks and other financial institutions, Mr Brown said. "We now have global financial markets, global corporations, global financial flows. But what we do not have is anything other than national and regional regulation and supervision. We need a global way of supervising our financial system."

The Group of Eight major industrial nations responded by announcing a global summit - perhaps as early as November in New York - to forge common action to prevent another economic meltdown. In a joint statement released by the White House, G8 leaders said they were united in their commitment to change the regulation of the world's financial sector to restore confidence and "remedy deficiencies exposed by the current crisis". "We are confident that, working together, we will meet the present challenges and return our economies to stability and prosperity," they said.

French President and current president of the European Council Nicolas Sarkozy said all EU nations also backed radical restructuring of international institutions such as the International Monetary Fund and World Bank. He demanded that the summit take place in November, "preferably in New York, where everything started", and lead toward "a new capitalism." Mr Sarkozy said emerging economies such as China, India and others outside the G8 - the US, Japan, Germany, France, Britain, Italy, Canada and Russia - should participate because "no one should feel excluded from what we are recasting."

Mr Brown has won considerable international kudos for his pound stg. 37billion ($93billion) recapitalisation of Britain's banks, a measure that has been followed by US and European leaders. He now wants to use that political capital to create a new system of international financial regulation, led by a reformed and enlarged IMF. At the Brussels summit, all 27 EU leaders backed Mr Brown's initial banking plans, following the lead of the 15-member eurozone, which on Sunday accepted his principles of underwriting interbank lending and taking stakes in struggling banks.

But the British leader went further yesterday. "Stage one was to stabilise the financial system with liquidity, recapitalisation and trying to get funds moving for small businesses and consumers," he said. "Stage two is to make sure that the problems of the financial system - which started in America - do not recur." The target was to "root out irresponsibilities and excesses" in the system. Mr Brown released a paper with eight proposed reforms to supervision and regulation he wants implemented by the new year, including new standards for disclosing off-balance sheet accounting and supervisors for the 30 biggest cross-border corporations in Europe and the US.


Israel ponders revival of Saudi peace plan
The Australian
Tuesday, October 21 2008

JERUSALEM: Israeli leaders are seriously considering a dormant Saudi plan offering a comprehensive peace between Israel and the Arab world in exchange for lands captured during the 1967 war, Defence Minister Ehud Barak said yesterday. Mr Barak said it might be time to pursue an overall peace deal for the region as individual negotiations with Syria and the Palestinians had made little progress. Mr Barak said he had discussed the Saudi plan with prime minister-designate Tzipi Livni, who was in the process of forming a new Israeli government, and that Israel was considering a response.

Saudi Arabia first proposed the peace initiative in 2002, offering pan-Arab recognition of Israel in exchange for Israel's withdrawal from Arab lands captured in 1967 -- the West Bank, Gaza Strip, east Jerusalem and the Golan Heights. The 22-member Arab League endorsed the plan last year. The Israeli Government has in the past described the plan as a good basis for discussion, but expressed some reservations.

"There is definitely room to introduce a comprehensive Israeli plan to counter the Saudi plan that would be the basis for a discussion on overall regional peace," Mr Barak told Israel's Army Radio. He noted the "deep, joint interest" with moderate Arab leaders in containing Iran's nuclear ambitions and limiting the influence of the radical Islamic Hezbollah movement in Lebanon and Hamas in Gaza.

Analyst Ghassan Khatib, a former minister in the Palestinian cabinet, said that although the Israeli interest in the six-year-old plan was "a little bit late", the plan was still valid. "I strongly believe that the Arab initiative is the best approach to peace between the Arabs and the Israelis," he said. "It fulfils all the legitimate objectives of Israel and those of the Palestinians and at the same time it has this regional dimension and it reflects one of the rare issues on which Arabs have consensus."

While Israel's outgoing prime minister, Ehud Olmert, has welcomed the Saudi plan, he and other leaders want to keep small parts of the territories captured in 1967. Israel also objects to language that appears to endorse a large-scale return of Palestinian refugees to lands inside Israel. Israel says a massive influx of Palestinians would destroy the country's Jewish character. Israeli President Shimon Peres proposed putting Israel's various peace talks on one track last month at the UN, calling on Saudi Arabia's King Abdullah to "further his initiative". His office said he had since been pushing the idea in meetings with Israeli, Arab and Western officials. While Mr Peres has no formal role in Israeli foreign policy, he is a Nobel peace laureate and well respected in the international community.

Mr Barak said he was in full agreement with Mr Peres. Mr Barak, who leads the Labour Party, is expected to play a senior role in the next administration. Ms Livni's office refused to comment on her talks with Mr Barak. In a related development, Palestinian Authority President Mahmoud Abbas said yesterday that he would meet Mr Olmert early next week. The two leaders have been meeting regularly this year to assess progress in peace talks.


Two looming elections leave Israel in limbo
The Australian
Tuesday, October 28 2008

JERUSALEM: The Middle East peace process, already on the backburner while the US elects a new president, now faces being sidelined even further by the continuing political uncertainty in Israel, analysts said yesterday. The new Kadima party chief, Foreign Minister Tzipi Livni, gave up at the weekend on efforts to put together a new coalition government to succeed the administration of Ehud Olmert, who has stepped down amid corruption allegations. Ms Livni yesterday called for snap elections, extending the country's political limbo for at least another three months.

January had been the month in which US President George W. Bush had hoped to leave the White House with a signed Middle East peace deal as an foreign policy achievement. But with Mr Olmert staying on as interim prime minster ahead of the polls, his Government will no longer have a majority in parliament -- nor the support it needs to take crucial decisions. "This Government is a transition cabinet, and legally it can govern only on a day-to-day basis," Israeli political analyst Ari Shavit said yesterday. "It has no legitimacy to take decisions on issues of principle. Olmert may try his luck for one last time, but if he achieves anything, I think 80 per cent of Israelis will regard the result as illegitimate."

For participants in the peace talks, both Palestinian and Israeli, the announcement of the forthcoming elections drives the last nail into the coffin of the peace process launched in the US less than a year ago. "Annapolis is dead. Olmert and Livni will not be able to reach an agreement because there is no longer a US mediator. No accord can be signed in the absence of an active American mediator between the Israelis and Palestinians," said Menahem Klein, professor of political science at Tel Aviv's Bar-Ilan University. Mr Shavit said he believed hopes of an agreement were in any case unfounded because of the weakness of the two leaders, Mr Olmert and Palestinian President Mahmud Abbas. "A solution to the Middle East conflict is becoming a lot more complicated," he said. Pessimism prevails in the Palestinian camp. "The peace process is directly linked to this crisis because it allows Israel not to commit itself in negotiations," said Palestinian political analyst Hani al-Masir.

All eyes are now focused on the other side of the Atlantic as Israelis and Palestinians await the outcome of the November 4 US presidential election. "Changes in Israel and in the United States will have a bearing on how the negotiations proceed," said Mr Abbas's spokesman, Nabil Abu Rudeina. "When all's said and done, everything depends on who the new US president is, because the American vote will affect the Israeli elections, which will not happen before the end of January or early February," said Akiva Eldar, editorial writer in Israel's Haaretz daily.

New opinion polls give the ruling Kadima party, headed by Ms Livni, a small edge over the hardline and hawkish Likud, led by Benjamin Netanyahu. Mr Netanyahu, a former premier, has in the past categorically opposed the creation of a Palestinian state alongside Israel, rejected the Oslo peace accords of 1993, and refused to make any concessions on Jerusalem -- a position that flies in the face of international peace plans.


New chief cheers pro-Israel lobby
The Australian
Geoff Elliott, Washington Correspondent
Monday, November 10 2008

BARACK Obama's selection of devout Jew Rahm Emanuel as his White House chief of staff has heartened many in the pro-Israel lobby in the US while prompting criticism from an Arab world hoping Senator Obama had sympathy for the Palestinians. Mr Emanuel, who served in the Israeli forces and whose father worked for the Israeli underground before the nation's founding, will be one of president-elect Obama's closest advisers.

"It's just another indication that despite the attempts to imply Mr Obama would somehow appoint the wrong person or listen to the wrong people when it comes to the US-Israel relationship ... that was never true," said the executive director of the National Jewish Democratic Council, Ira Forman. He said Mr Emanuel had been an effective leader and "his voting record and leadership in support of the US-Israel relationship are outstanding".

Mr Emanuel's deep Jewish roots come with his own personal commitment to the Jewish state, which he served as a civilian volunteer on an Israeli military base during the first Gulf War in 1991. His father Benjamin told an Israeli newspaper: "Of course he will influence the president to be pro-Israeli." Because of Senator Obama's African heritage and middle name Hussein (although the president-elect is Christian), there had been attempts through internet smears to portray him as a Muslim Manchurian candidate.

Senator Obama caused a stir in his primary race against Hillary Clinton when he said he would unconditionally meet Iranian leaders in pursuit of diplomatic solutions to that country's pursuit of a nuclear program, but he has since pulled back on that statement, speaking of necessary "preparations" before any meetings took place. On his victory last week, and for the first time since the Iranian revolution, an Iranian president found cause to send a congratulatory note to a new US president. Mahmoud Ahmadinejad's letter, however, got short shrift from Senator Obama.

At his first press conference since becoming president-elect after last week's historic election victory, Senator Obama - Mr Emanuel standing by his side with a phalanx of other advisers - reinforced existing US policy that it was "unacceptable" for Iran to have nuclear weapons. "We have to mount an international effort to prevent that from happening. Iran's support of terrorist organisations, I think, is something that has to cease," Senator Obama said. "I will be reviewing the letter from President Ahmadinejad. And we will respond appropriately. Obviously, how we approach and deal with a country like Iran is not something we should, you know, simply do in a knee-jerk fashion."

Senator Obama noted that the US had only one president at a time and said: "I want to be very careful we are sending the right signals to the world as a whole that I am not the president, and I won't be until January 20." But in selecting Mr Emanuel, a hard-charging player in Washington, as his chief of staff, Senator Obama has shown that his administration from the top will be a mix of his own eloquence and smooth talking with the sometimes profane and blunt toughness of Mr Emanuel. A Palestine blog called the Palestinian Pundit headlined an item about Mr Emanuel's appointment: "For all those hoping that perhaps Mr Obama was secretly pro-Palestinian - very bad news."

Senator Obama's office had little to say yesterday in response to a statement by Khaled Mashaal, leader of the militant Palestinian group Hamas, saying he was ready to talk to Senator Obama "with an open mind". The exiled militant leader told Sky News from the Syrian capital, Damascus, that the election of a US president with African roots was "a big change".

Meanwhile, Senator Obama spoke to Russian President Dmitry Medvedev yesterday, among one of his many calls to international leaders. A Kremlin statement said Senator Obama and Mr Medvedev "expressed determination to create constructive and positive interaction for the good of global stability and development" and agreed their countries had a responsibility to address "serious problems of a global nature". To that end, Mr Medvedev and Senator Obama believe an "early bilateral meeting" should be arranged, the statement from Moscow said.


Shimon Peres upbeat on Iran dialogue
The Australian
The Times, Richard Beeston, New York
Tuesday, November 18 2008

ISRAEL believes there is a chance for dialogue with Iran if Barack Obama succeeds in uniting the international community behind a common policy. Israeli President Shimon Peres said his country's most implacable foe could be brought to the negotiating table, but it would depend on a new political climate and economic factors, in particular a falling oil price. The 85-year-old politician said he expected Israel to achieve peace with its Arab neighbours in his lifetime, and even predicted that he would one day visit Damascus and Riyadh.

Mr Peres's upbeat message will no doubt be dismissed by many in the Middle East as the musings of a lifelong optimist. Certainly no recent Israeli leader has expressed any positive view of Iran, whose nuclear policy and support for militant groups are regarded as the major threats to the Jewish state. But Mr Peres insisted he could see new opportunities in the region, citing his invitation to attend a multi-faith conference in New York last week, initiated by Saudi Arabia's King Abdullah.

"If there will be a united policy on Iran and there is a new (lower) price for oil, then Iran will have to come to terms with a proportionate reality of our times," the Nobel Peace Prize winner and former prime minister said. "If the Iranians feel there is a body politic behind (the push for talks) and they cannot just escape by sending (President Mahmoud) Ahmadinejad to spread quick wisdom, then there is a chance." But he said no progress was possible until Iran had met three conditions: to halt its controversial nuclear and ballistic missile programs, to withdraw support for militant groups such as Hamas and Hezbollah, and to stop the use of "terror".

His remarks coincided with a major US policy review of relations with Iran, which President George W. Bush included in his "axis of evil". President-elect Barack Obama has hinted he is prepared for "direct diplomacy" with Tehran. There is even talk of opening a US interests section in Tehran, the first diplomatic mission since the 1979 Iranian revolution, when the US embassy was seized by students and US diplomats were held hostage for more than a year.

Mr Peres held out hopes that Israel could reach a "land for peace" agreement with Syria over the Golan Heights, captured by Israel in the 1967 Six Day War. "I think Israel is ready to make peace with Syria and pay the cost," he said, confirming talks with Damascus were continuing. But he warned the regime of President Bashar al-Assad that peace was "not a cocktail". Mr Peres said Israel would accept a deal only if Syria halted its support for militant groups such as Hezbollah and Hamas. "The problem with Syria is not so much the land but the peace," he said. "Several Israeli prime ministers indicated they are ready to give back the land. But the Syrians do not indicate they are ready to provide peace."

As for Britain, Mr Peres said it could play an important role in the region, though he did admit being concerned about growing anti-Israeli sentiment in the country. "I don't understand the criticism," he said. "Why are they criticising us ' That war is an ugly story. We know it. I can assure them we did not invite it and we are not happy with it, and as we have shown, we are ready to pay the cost. I do not take their superior position. They do not go into the realities of the situation. They just want to be politically correct."


Netanyahu's Likud leads Livni's party
The Australian
Correspondents in Jerusalem and Ramallah AP
Friday, November 21 2008

JERUSALEM: A pair of polls published last night show Israeli Opposition leader Benjamin Netanyahu's hardline Likud party cruising past Foreign Minister Tzipi Livni's moderate Kadima party to a decisive victory in the February 10 elections. The polls also forecast strong support for Mr Netanyahu's hardline allies, putting him in a commanding position to put together a hawkish coalition that would probably end peace talks with the Palestinians, at least in their present form.

The polls came as Palestinian leader Mahmoud Abbas took his case for peace directly to ordinary Israelis, assuring them in Hebrew-language newspaper ads that a withdrawal from the West Bank, Gaza Strip and parts of Jerusalem would bring them full recognition by the Arab world. The full-page ad, published in three Israeli dailies, spells out this trade-off, first offered in the 2002 Arab Peace Initiative. The ad says 57 Arab and Muslim countries would establish diplomatic ties with Israel in exchange for a withdrawal from the lands that would make up Palestine. It marks the first time a Palestinian leader has tried to reach Israelis in this way. Abbas aide Saeb Erekat said: "Mr Abbas felt that ordinary Israelis did not know enough about the Arab offer and wanted to approach them directly."

Mr Netanyahu believes the US-backed talks, which aim to establish an independent Palestinian state alongside Israel, have been a failure. He thinks negotiations should largely be limited to developing the Palestinian economy. Ms Livni, who has been Israel's chief negotiator for the past year, wants to continue the talks.

Elections were set in motion in September when then prime minister Ehud Olmert resigned amid corruption charges and his deputy, Ms Livni, was unable to form a coalition government of her own. The vote comes 18 months ahead of schedule. Just weeks ago, polls showed Ms Livni and Mr Netanyahu in a tight race. While Ms Livni has been relatively out of sight in recent weeks, Mr Netanyahu has been prominent, adding a slew of high-profile new recruits to his party, including a former military chief and retired politicians with reputations for honesty.

A poll published in the Haaretz daily yesterday shows Likud garnering 34 seats in the 120-seat parliament, up from its present 12, followed by Kadima with 28. Kadima, the ruling party, has 29. The poll forecasts the once-dominant Labor, headed by Defence Minister Ehud Barak, winning just 10 seats. A poll in the Yediot Ahronot daily has similar results, forecasting 32 seats for Likud, compared with Kadima's 26.


Israeli general ups ante on Iran
The Australian
Rebecca Weisser, Jerusalem
Monday, November 24 2008

A FORMER chief of staff of the Israeli Defence Force, in line to be defence minister if Likud wins elections early next year, has flagged the possibility not just of an Israeli strike on Iranian nuclear sites but of regime change in Tehran. Lieutenant General Moshe Ya'alon told a group of Australian journalists visiting Jerusalem that Iran must be prevented from acquiring nuclear weapons, and that a strike on Iran's nuclear facilities would not be the "end of the game". "We need to confront Iran and the rise of jihadism. We can't stabilise the Middle East without confronting Iran. They support elements that are undermining governments throughout the region." General Ya'alon said a two-pronged approach was necessary to defeat jihadism. "From top down, using a big stick," he said. "From bottom up, using education."

General Ya'alon did not rule out the possibility that something short of a military strike could put sufficient pressure on the Iranians to make them halt their nuclear program. "Despite apocalyptic and messianic talk, when dealing with its own survival the Iranian regime is deeply rational. In 2003, the Iranians suspended their nuclear program. Why ' They saw the United States defeat the Iraqi army in three months - an army they had been unable to defeat, at the cost of a million lives, in eight years. But when they saw the US bogged down in what they saw as a quagmire, in 2005, they resumed their program."

General Ya'alon said that if Israel were forced to resort to a military attack to prevent Iran acquiring a nuclear capability. there would need to be a follow-up to prevent the regime from rehabilitating itself. The military chief said there would be regime change in Iran, but it would be brought about by the Iranian people. "Israel needs to defeat the Iranian regime, not the people." General Ya'alon said Islamic jihadists in Iran and elsewhere believed they were on a roll. They saw the withdrawal of the US and the French from Lebanon in 1983 as a victory. They saw the fall of the USSR as a victory. They saw Israel's unilateral withdrawal from Lebanon in 2000 as a victory. They saw Israel's withdrawal from Gaza and Hamas's takeover as a victory. And they saw the 2006 Lebanon war as a victory. General Ya'alon said it was time to fight back and that territorial concessions were counter-productive.

General Ya'alon's tenure as chief of staff of the Israeli Defence Force from 2002 to 2005 was marked by success in quelling the second Palestinian offensive launched in September 2000 in which more than a thousand Israelis and four thousand Palestinians lost their lives. But his position as chief of staff was not extended in 2005. Reports pointed to tensions between him and the then defence minister Shaul Mofaz and prime minister Ariel Sharon over unilateral disengagement from the Gaza strip. His deputy, Dan Halutz, succeeded him as chief of staff but was forced to resign in January last year in the wake of the second Lebanon war.

General Ya'alon was not tarnished, like those who orchestrated his premature departure from the IDF, by involvement in the second Lebanon war. General Ya'alon announced last week he would join the Likud party and participate in primaries to determine Likud candidates for the February 2009 elections. At this stage, Likud looks like the party of change the electorate might turn to after the allegations of corruption and the apparent incompetence of the Olmert administration.


Lame-duck chiefs back peace effort
The Australian
Wednesday, November 26, 2008

WASHINGTON: US President George W. Bush and Israeli Prime Minister Ehud Olmert yesterday said the Middle East peace process, which had so far failed to yield results, would continue after the two lame-duck leaders left office. The close allies spoke at the beginning of a farewell meeting. Mr Bush will leave the White House on January 20 and Mr Olmert will step down after February 10 elections, amid a corruption scandal.

Although US president-elect Barack Obama has vowed to continue to support the talks to end the 60-year conflict, the prospects of the process launched almost a year ago at an international conference in Annapolis, Maryland, remain uncertain. "I believe that vision is alive and needs to be worked on," Mr Bush said. "We strongly believe that Israel will benefit by having a Palestinian state, a democracy on her border that works for peace." Mr Olmert said the Annapolis process would continue because "a two-state solution is the only possible way to resolve the conflict in the Middle East".

Mr Bush and Mr Olmert, both hoping to end their time in office with proof of some success, would use the talks to take stock of their work over the past three years, officials said. But it remained unclear if they would aim to draw up a document summarising the latest round of talks. The peace talks have made little apparent progress, despite intensive meetings between Israeli and Palestinian leaders and strong US backing, as all sides have acknowledged they would not meet their goal of inking a peace treaty before Mr Bush left office. The chances of a breakthrough seem remote as Israel heads for polls and the Palestinians remain divided between Western-backed President Mahmoud Abbas and the Islamist Hamas movement.

Although they were unlikely to make any major decisions, the two were expected to discuss international efforts to halt Iran's controversial nuclear drive, which Israel and the US suspect is aimed at developing an atomic bomb, a claim denied by Tehran. Mr Olmert wanted to clinch new commitments on Iran from his staunch ally before Mr Obama, whose policy towards the Islamic republic has raised some concern in Israel, entered the White House, officials said. Israel, the region's sole, if undeclared, nuclear-armed state, considers Iran its main strategic threat because of its nuclear program. Mr Olmert has repeatedly said Israel would prefer to use diplomatic and economic pressure to persuade Iran to abandon its program, but he has refused to rule out a military strike.


Livni makes an early bid for the PM's office
The Australian
Abraham Rabinovich, Jerusalem
Saturday, November 29, 2008

FOREIGN Minister Tzipi Livni called on Prime Minister Ehud Olmert yesterday to suspend himself after Israel's Attorney-General announced plans to indict Mr Olmert for fraud. Although Ms Livni cited "moral and ethical" reasons for Mr Olmert's departure, political analysts are agreed that her primary motivation is to enhance her credibility as a national leader by moving into the prime minister's office for the two months until February's election. "Israel cannot tolerate having a Prime Minister who has been indicted," Ms Livni said at a press conference. "The Prime Minister must suspend himself. There is no other option."

Ms Livni is also Deputy Prime Minister and would automatically take over.

Polls show Ms Livni trailing former prime minister Benjamin Netanyahu of Likud in the election race by a steadily growing margin, in good part because the world economic crisis has unexpectedly made the economy a major concern of the electorate. Ms Livni previously had hoped that her reputation as corruption-free would bring her the support of a broad public weary of the shady practices attributed to Mr Olmert and some of his predecessors. She hopes to regain an edge by becoming a sitting prime minister where she could demonstrate tough-mindedness and political savvy, qualities the public is not certain she has.

By law, Mr Olmert remains in power as a caretaker prime minister until a new government is formed, which will probably not happen before March. Recent economic activism has reinforced speculation that Mr Olmert is paving the way for a return to politics after the corruption investigations have been concluded. Aides say he is convinced he will be cleared of all charges. The fraud charge against Mr Olmert involves multiple billing of government and other organisations for airline tickets while serving as a mayor and minister before becoming prime minister.


Hamas marks its 21st by ending truce with Israel
The Australian
Tuesday, December 16, 2008

GAZA CITY: Palestinian Islamist movement Hamas, which controls Gaza, said yesterday that a troubled Cairo-brokered truce with Israel would not be renewed when it runs out on Thursday. The comments came as a spokesman for outgoing Israeli Prime Minister Ehud Olmert insisted his Government remained keen to see the six-month-old truce extended beyond Thursday, provided Hamas halted rocket and mortar fire against southern Israel.

Hamas political supremo Khaled Meshaal, in an interview from Damascus with Hamas's Al-Quds satellite television, said:"The truce was limited to six months and ends on December 19. Given that the enemy is not respecting its commitments and the blockade is still in place against our people, for Hamas, and I think for the majority of forces, the truce ends after December 19 and will not be renewed." Mr Meshaal's statement came on the day marking the 21st anniversary of the Islamist group's formation at the start of the first Palestinian uprising. The ceasefire had already been marred by persistent tit-for-tat violence in recent weeks, with Hamas complaining that Israel had failed to keep its side of the bargain by easing its crippling blockade of the aid-dependent Gaza Strip.

Senior Israeli Defence Ministry official Amos Gilad, who conducted the negotiations for the original truce that went into force on June 19, returned to Cairo for talks with Egyptian mediators on an extension. Neither he nor Egypt's pointman for the negotiations - intelligence chief Omar Suleiman - made any comment after their talks. But the Israeli premier's spokesman Mark Regev said in Jerusalem: "Israel is interested in calm reigning in the south. It was and is still ready to respect the commitments obtained through the mediation of Egypt."

A senior Israeli defence official said last night there was no end date for the troubled truce as far as the Israelis were concerned. "When we accepted a lull six months ago it was clearly understood that there was no end date. For Israel, the date December 19 has no significance," the adviser to Defence Minister Ehud Barak said on Israeli public radio. "If the lull continues, Israel will respect it. If the opposite, we will react ... with the appropriate military means."

Aides to Mr Barak have defended the Gaza truce despite a flurry of cross-border violence since November 4 that has prompted several cabinet ministers to call for a major ground offensive. Foreign Minister Tzipi Livni said the Jewish state was determined to end Hamas's rule in Gaza. "The state can and should provide an answer to the terror with its available military means. We cannot allow Gaza to remain under the control of Hamas," her office quoted her as saying.

Hamas has shown mounting frustration with the truce agreement since Israel tightened its blockade of Gaza after last month's resurgence of violence. For yesterday's anniversary, Hamas staged a show of strength, drawing huge crowds on to the streets of Gaza City that Hamas TV said ran into the hundreds of thousands. In an address to the crowds, the head of the Hamas Government in Gaza, Ismail Haniya, boasted that US President George W. Bush's administration had failed to defeat his movement, which had only grown stronger. "Bush declared war on the Palestinian people ... He provided money and arms to the seditionists to wage a war against legality," Mr Haniya said, referring to the deadly street fighting with loyalists of Western-backed Palestinian Authority President Mahmoud Abbas that preceded Hamas's takeover of Gaza in June last year. "Bush failed, we have not been overthrown," he said. And despite Israel's blockade, "Hamas is stronger and will remain stronger because it draws its strength from God".

Former US president Jimmy Carter met Mr Meshaal in Damascus at the weekend for talks on the blockade, the truce, and Israeli soldier Gilad Shalit, who has been held hostage in Gaza for more than two years, Hamas said. Two senior political officers of Hamas, Mussa Abu Marzuk and Mohammad Nasr, also took part in the meeting, which lasted several hours.


Peace in Bethlehem as Hamas fires on Israel
The Australian
Friday, December 26, 2008

BETHLEHEM: Pilgrims and local Christians celebrated Bethlehem's merriest Christmas in eight years yesterday, with hotels booked solid, Manger Square bustling with families and Israeli and Palestinian forces co-operating to make things run smoothly for the holiday. But the festivities in the West Bank town contrasted sharply with Hamas-run Gaza, just 70km away. While revellers in Bethlehem launched pink fireworks from a rooftop, Palestinian militants from Gaza increased the range and intensity of their rocket fire against Israel, as the Israeli security cabinet considered options that included broader military action or efforts to renew a truce that recently expired. Israeli aircraft over southern Gaza targeted militants firing rockets, killing one and wounding two others.

Israeli Foreign Minister Tzipi Livni last night vowed to strike back at the Hamas rulers of Gaza. "Enough is enough. The situation is going to change," Ms Livni said in Cairo after meeting Egyptian President Hosni Mubarak to discuss the deteriorating situation. "Unfortunately there is one address to the situation of the people in the Gaza Strip, this is Hamas, Hamas controls them, Hamas decided to target Israel, this is something that has to be stopped, and this is what we're going to do", she said.

Earlier in the West Bank, crowds gathered at nightfall outside Bethlehem's Church of the Nativity, the traditional birthplace of Jesus, ahead of the midnight Catholic mass. In Manger Square, vendors hawked roasted peanuts and Santa Claus hats. Many in the square were Muslim residents out to enjoy their quiet town's annual moment at the centre of world attention. "Bethlehem is like the soul of the universe, and it's like an explosion of love here," said Stefano Croce, 46, a fashion photographer from Rome. Bethlehem has suffered from the Israeli-Palestinian fighting of recent years, and is surrounded on three sides by the concrete slabs and fences of the separation barrier Israel began building during a wave of Palestinian suicide bombings. The Palestinians see the barrier as a land grab and say it has strangled the town's economy. The town's Christian population has dwindled as many are forced abroad. Current estimates say between 35 to 50 per cent of the town's 40,000 people are Christian, compared with 90 per cent in the 1950s.

Israel has been holding peace talks over the past year with the moderate West Bank Government of President Mahmoud Abbas, and new security co-operation between Israeli and Palestinian officers has allowed Palestinian forces a limited measure of independence in places like Bethlehem. The increasing sense of security inside Palestinian towns such as Bethlehem is largely responsible for the rise in tourism. The Palestinians have counted more than one million visitors to Bethlehem so far this year, a rise of more than 20,000 since last year.

The situation is dramatically different in Gaza, controlled by the Islamic militant group Hamas. A six-month ceasefire between Israel and Hamas disintegrated last month before expiring officially last week, sending Gaza and nearby areas of Israel into a spiral of violence. Gaza militants pummelled southern Israel towns yesterday with the largest barrage of rockets and mortars since June, when the ceasefire began. More than 80 rockets and mortars hit, forcing residents into shelters. With the projectiles inaccurate and residents well-drilled in taking cover, no one was injured in the attacks.

Same Day
Iran head gives UK holiday message The Times

LONDON: Jewish groups were up in arms yesterday when it was revealed that British television's Channel 4's "alternative" Christmas Day broadcast was to be delivered by President Mahmoud Ahmadinejad of Iran. Mr Ahmadinejad's speech was due to go out last night, four hours after the Queen's traditional Christmas Day message was broadcast on the main channels. His message was a spiritual one, but included some openly political elements -- including the implicit claim that if Jesus were alive today, he would oppose US hegemony in the world.

"If Christ was on Earth today, undoubtedly he would stand with the people in opposition to bullying, ill-tempered and expansionist powers," Mr Ahmadinejad was to say in a speech to be broadcast in Farsi, with English subtitles. "If Christ was on Earth today undoubtedly he would raise the banner of justice and love for humanity to oppose warmongers, occupiers, terrorists and bullies the world over. If Christ was on Earth today undoubtedly he would fight against the tyrannical policies of the prevailing global economic and political systems, as he did in his lifetime."

It is not the first time the national broadcaster has encountered controversy since Quentin Crisp delivered Channel 4's first alternative Christmas message in 1993. In 2006 a veiled British-born Muslim woman used the message to attack then home secretary Jack Straw for his criticism of the niqab (face veil) earlier in the year. Stephen Smith, director of the Holocaust Centre in Britain, said Mr Ahmadinejad's message should be treated with caution. The Iranian President has repeatedly called the Holocaust a "myth" and called for the annihilation of Israel. Mr Smith said: "Many of his political and historical views are very dangerous and do not uphold the views in his message. I think this benign message is deception. People need to be alert to the fact this is a wolf in sheep's clothing."

Henry Grunwald QC, president of the Jewish Board of Deputies, said: "The appearance on our television screens of a man whose prejudices are so well-documented and who has openly called for the eradication of another member country of the United Nations is an affront to decency. To invite him to deliver a Christmas message, even a so-called alternative one, fills me with disgust."


Israel lifts Gaza blockade for aid
The Australian
Correspondents in Jerusalem, AP
Saturday, December 27, 2008

ISRAEL reopened its border with Gaza last night to allow deliveries of humanitarian aid, despite continued rocket and mortar fire from the coastal strip and growing expectations of a large-scale Israeli military campaign against Hamas militants. The military said about 90 trucks would deliver medicine, fuel, cooking gas and other vital goods into Gaza. The shipment includes a large donation of goods from Egyptian President Hosni Mubarak's wife as well as more than 400,000 litres of fuel and 180 tonnes of natural gas.

Israel's Defence Ministry said it agreed to open its cargo crossings into Gaza to avoid a humanitarian crisis. Defence Minister Ehud Barak said the decision came after consultations with defence officials as well as calls from the international community. Cabinet Minister Binyamin Ben-Eliezer said the humanitarian shipment was meant to be a message to the people of Gaza that they were not Israel's enemy. "We are sending them a message that the Hamas leadership has turned them into a punching bag for everyone," he told Israel Radio. "It is a leadership that has turned school yards in rocket launching pads. This a leadership that does not care that the blood of its people will run in the streets."

The deliveries did not persuade Gaza militants to halt their rocket and mortar fire on Israeli border communities. The military said more than 10 rockets and mortars were fired towards Israel early yesterday. One home was struck but no injuries were reported. Israel had originally agreed to open the cargo crossings with Gaza on Wednesday, but shut the passages after militants began pounding southern Israel. The attacks were the heaviest since an Egyptian-mediated six-month truce between Israel and Gaza's Hamas rulers expired last week.

Pressure has been mounting in Israel for the military to strike forcefully against Gaza militants and Israeli leaders have been voicing strong threats in recent days. But yesterday, military officials said the army was planning a routine rotation of its troops along the Gaza border in the coming week. That, coupled with current winter weather, made an imminent operation seem unlikely, they said. Israel has maintained a strict blockade of Gaza since the June 19 ceasefire began unravelling six weeks ago, allowing in only small quantities of essential goods. Egypt has also sealed its border crossing with the territory, which is Gaza's main gateway to the outside world.

Israeli Foreign Minister Tzipi Livni was in Cairo on Thursday for meetings with Mr Mubarak, who urged Israel to exercise restraint in response to the rocket fire. Prime Minister Ehud Olmert also issued an emotional plea to the people of Gaza to stop firing and turn against their Hamas leaders, whom he called "the main reason for your suffering -- for all of ours".

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