1. At the beginning of the meeting, Prime Minister Ariel Sharon eulogized Israel Prize laureate Ephraim Kishon.

2. Defense Minister Shaul Mofaz briefed ministers on current security matters, and noted that the focal point of developments in the past week was on the process begun by the Palestinian Authority one and a half weeks ago to rein in terrorism by deploying Palestinian security forces in the Gaza Strip. This was initiated by Abu Mazen, who is acting on two fronts in order to achieve security calm:

• First - to reach an agreement with the main Palestinian organizations to end terrorist attacks against Israel;
• Second - security operations to restrain hostile terrorist activity against Israel in the Gaza Strip, where Palestinian security forces were deployed in southern Gaza at the end of last week.

In order to allow deployment with complete coordination, military meetings were held between Israeli officers and their Palestinian counterparts. The meetings were characterized by a positive atmosphere and aided the success of the deployment of Palestinian forces. Following this there has been a drop in terrorist attacks in the Gaza Strip.

The Defense Minister emphasized that despite the fact that the number of terrorist attacks has been reduced, there is still a high number of threats and several terrorist organizations are continuing efforts to perpetrate attacks. In light of these developments, Israel’s policy regarding the use of force at this time must be restrained and focused on thwarting “ticking bombs,” while making every effort to ensure that Palestinian security forces and civilians are not injured. In addition, every effort must be made to further ease conditions for the Palestinian population. IDF open-fire regulations have been amended in accordance with the new situation.

Defense Minister Mofaz said that he had ordered the IDF and other security services to demonstrate sensitivity to the Jewish population in the Gaza Strip and to act to increase their feeling of security. The Defense Minister also said that he had instructed that a number of measures be implemented in order to ease conditions for the Palestinians including preparations for opening the Karni, Rafiah and Erez crossings. In addition, permits for senior Palestinian officials to travel between various areas have been renewed.

Defense Minister Mofaz also commented on the situation in the north, where Hizbullah’s desire to perpetrate terrorist attacks in order to wreck progress with the Palestinians is well known. Iran and Syria are also involved in the background. The Defense Minister remarked on Nasrallah’s speech last night in which the latter expressed great desire to continue acting in order to obtain the release of all prisoners held in Israel and hinted at the possibility that attempts might be made to kidnap Israeli soldiers.

The Defense Minister also discussed his recent visits to France and Great Britain.

3. Minister Natan Sharansky briefed ministers on anti-Semitism around the world in the past year and discussed the main characteristics of Arab-Islamic anti-Semitism. The Minister pointed out that the roots of Islamic anti-Semitism are directed towards Israel as a Jewish-Zionist state and towards the Jewish people who support Israel. There is no clear distinction between incitement against Israel and incitement against Jews living in the Diaspora.

Minister Sharansky added that Islamic anti-Semitism uses quotations from the Quran and from Islamic traditions, which take on political significance in the spirit of extremist Islam, in order to delegitimize and dehumanize Zionism, the State of Israel and the Jewish people, and give legitimacy to terrorism against Israel and against Jews.

Minister Sharansky also discussed increasing anti-Semitism in European countries and in the former Soviet Union, and to anti- Semitic violence against Jews and Jewish institutions.

4. The Cabinet discussed the issue of uniform cuts in the state budget in order to divert resources toward implementing reforms in the education system and boosting social welfare. The Cabinet decided as follows:

a) To reduce ministries’ 2005 budgetary base by 3%. These reductions will be implemented despite previous Cabinet decisions and will, therefore, apply to the budgets allocated to the implementation of the aforementioned decisions.

b) Despite the foregoing, no cuts will be implemented in those areas the implementation of which stems from primary legislation in which specific budgetary amounts or rates are defined, and in areas that have to do with fulfilling contractual obligations by the Government (including - inter alia - wage agreements).

c) Despite a) above, and as per the Government’s priorities, the reduction in the Education Ministry budget will not include those resources devoted to implementing the education system reforms; the reductions in the Social Welfare Ministry budget will not include budgetary resources devoted to providing welfare services.

d) This decision is in addition to - and does not detract from - previousCabinet decisions regarding reductions in ministry budgets.

This decision was made in light of the need to modify the 2005 state budget in order to reflect the budgetary supplements necessary to cover various expenses, mainly regarding the financing of coalition agreements and in order to meet expenditure restrictions and the 2005 deficit target.

Interior Minister Ophir Pines-Paz referred to a projected NIS 90 million cut in his ministry’s budget, which constitutes a direct blow to local authorities in the recovery process. The Finance Ministry Budget Director said that his ministry was channeling approximately NIS 200 million towards balancing grants, as was agreed upon by the Knesset Finance Committee, in order to ease local authorities’ plight.

The Finance Ministry Budget Director also said that the objective is to strengthen those authorities undergoing difficult recovery processes. The Finance Ministry would find it acceptable if NIS 30 million were not deducted from the recovery programs, with the local authorities themselves absorbing only NIS 20 million out of the remaining NIS 60 million that is due to be cut.

5. The Cabinet discussed formulating a plan to increase the number of hospital beds and to develop hospital services infrastructure and decided to appoint the Health Ministry Director-General to chair a joint Health and Finance Ministry team that would, within 45 days, prepare a detailed plan. The team will present its recommendations to Health Minister Danny Naveh and Finance Minister Benjamin Netanyahu.

Hospital occupancy rates in Israel are among the highest in the western world and have been on the increase since 2001. The overall occupancy rate for 2004 was 98.5%, while in internal medicine wards it was 108.5%. This is due to the fact that the number of hospital beds per capita has been declining, resulting in overcrowding amidst harsh conditions, including inadequacies in providing medical care and regarding privacy and patients’ dignity.

6. The Cabinet approved the compositions and responsibilities of the Ministerial Committees on the ISA, Immigrant Absorption, Domestic Affairs and Services, State Control, and Symbols and Ceremonies. (Copyright ©2004 The State of Israel. 01/30/05)