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At last, Israel has a new government to tackle economy

At long last, Israel has a new government to deal with the country's economic crisis. It took 72 hours of virtually round-the-clock negotiations between the Labor Party and the Likud bloc.

But Thursday, more than six weeks after the Israeli national elections, Labor leader Shimon Peres presented to the Israeli parliament a government of "national unity" that was expected to get a vote of confidence from at least 90 of the parliament's 120 members.

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Mr. Peres had gone down to the wire of the 42-day mandate he was granted by Israeli President Chaim Herzog in seeking to form a government. (His time would have run out Sunday.)

And in the end, it was unclear just how much unity the government would be able to achieve.

An exhausted Peres told an Israel Radio reporter early Thursday that the arrangement was "a government of disagreement, and it will have to operate despite disagreements."

Peres had to make some painful concessions to the Likud. Chief among them was his agreement to a rotating premiership. Peres will serve 25 months as prime minister, to be followed by outgoing Prime Minister Yitzhak Shamir, who also will serve 25 months.

In addition, the Labor Party had to accept former Defense Minister Ariel Sharon -- a Likud hard-liner -- in the Cabinet as minister of industry and commerce. Mr. Sharon was forced to resign as defense minister because of his role in Israel's 1982 invasion of Lebanon.

Labor also was unable to wring an agreement from the Likud to freeze settlements on the occupied West Bank. As it stands, five or six settlements already in the planning stage will probably be built in the next year. Future settlements must be approved by the Cabinet.

But in the end, a unity government emerged because there was simply no reasonable alternative for Labor and Likud. Neither party was able to find enough allies among the 13 small parties represented in the parliament to form a narrow coalition. Neither party could afford the campaign expenses of a new election.

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There were at least two substantial reasons for forming a unity government.

First is the alarming state of the economy, with its 400 percent inflation. Israel's foreign reserves have dwindled to a dangerous low. The Israelis badly need an infusion of cash, and United States Secretary of State George Shultz has hinted that aid above the planned $2.5 billion grant for 1985 would be forthcoming only if the Israelis instituted a coherent economic policy.

It is widely believed here that drastic measures will have to be taken to curb inflation and improve Israel's export economy. Those measures could only be taken by a broad-based government that can overcome opposition to deep cuts in government expenditures and services.

The other factor working for national unity was the political position of Mr. Peres and Mr. Shamir. Both face grave challenges to their leadership within their own parties. Both saw a national-unity government as the only way of stay in power.

Peres and Shamir are reported to have built a good working relationship during the weeks of talks. That relationship, and their mutual interest in making the government work, may translate into an effective partnership.

The test will come almost immediately, as the new government deals with the economy. The Likud controls all the important economic portfolios in the 25 -member Cabinet. Likud and Labor have some basic disagreements on the causes of the nation's hyperinflation and the way the new government should handle the problem.

"The debate isn't over yet," says Dr. Nimrod Novik, a Tel Aviv University professor who served as a political adviser to Peres during the campaign. "Both parties agree the economy needs to be fixed, but they differ on what is the best way to fix it." But, Novik says, "This will be the first time an Israeli prime minister will see the economy as his job and not something to be delegated."

Because foreign policy issues are probably going to be put on a back burner, at least initially, the government will be able to devote itself to domestic issues.

And that, according to political observers here, would be a much-needed refocusing of Israeli attention.

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