ISRAEL MEDIA REACTION

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SUBJECT: ISRAEL MEDIA REACTION

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SUBJECTS COVERED IN THIS REPORT:
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Mideast

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Key stories in the media:
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All major media led with the financial crisis emanating from the
U.S. Banners: "Wall Street Collapsing following 'Lehman Brothers';
Fears of Losses in Israel" (Ha'aretz); "Collapse" (Yediot);
"Hurricane" (Maariv); "Credit Crisis Topples U.S. Financial Icon"
(Jerusalem Post); "Concern: World Recession" (Israel Hayom);
"'Once-in-a-Century Crisis'" (Makor Rishon-Hatzofe). The media
reported that the Tel Aviv Stock Exchange indexes dropped by several
percentage points yesterday and today. Ha'aretz reported that the
exposure of Bank Leumi and Bank Hapoalim (Israel's largest banks) to
the fate of the collapsed U.S.-based Lehman Brothers investment
bank, to the tune of $95 million and $109 million respectively,
doesn't necessarily mean that the banks will have to write off these
amounts. These figures represent the maximum losses, but at this
stage it remains unclear how much bond holders will be able to
recover after Lehman's collapse.

All media cited a warning by security officials yesterday that
Hizbullah and Palestinian terrorists are planning an imminent joint
operation to kidnap Israelis vacationing in the Sinai Peninsula and
transfer them to the Gaza Strip, where they will be held until
Palestinian prisoners in Israeli jails are released. "The threat
[of an attack] is getting clearer and more concrete," Defense
Minister Ehud Barak was quoted as saying, urging Israelis already in
the Sinai to return immediately. The GOI's counterterrorism bureau
intensified its warning against travel to the peninsula yesterday,
noting that while a warning against Israeli travel to Sinai has been
in place for some time, new information received over the past few
days suggests that the probability of an attack in the near future
is high. Israel Radio reported that the government's warning was
poorly heeded.

Ha'aretz reported that a Ha'aretz/Channel 10-TV poll (see below)
predicts a landslide victory for FM Tzipi Livni in the Kadima
primaries. Ha'aretz reported that Kadima's new chair will have to
decide between Shas or new elections. Ha'aretz quoted sources close
to PM Ehud Olmert as saying that he is expected to resign from the
Knesset if the person who replaces him as chair of Kadima manages to
form an alternative cabinet. The sources were also quoted as saying
that if the primary is decided in the first round, Olmert might
resign no later than Sunday. On the other hand, Maariv quoted
Olmert associates as saying that as long as there is an interim
government, Olmert will head it. The Jerusalem Post reported that
Transportation Minister Shaul Mofaz told supporters in Netanya
yesterday that he will already have a new coalition ready by the
Jewish New Year (at the end of the month).

Ha'aretz reported that Spanish FM Miguel Moratinos told the
newspaper that PA President Mahmoud Abbas is seriously considering
Olmert's proposal for an agreement in principle on the core issues
in the Israeli-Palestinian negotiations. Moratinos made the comment
after he met with the two leaders. Israel Radio reported that
Olmert and Abbas will not be accompanied by their staffs today as
they meet in Jerusalem. Maariv and The Jerusalem Post quoted Olmert
as saying before the Knesset's Foreign Affairs and Defense Committee
yesterday that missing an agreement with the Palestinians would
carry an insufferable price for Israel. The radio quoted chief
Palestinian negotiator Ahmed Qurei as saying that there will be no
negotiations with Israel without resolving the issue of Jerusalem,
and that the Palestinians will not give up on the right of return.
Yated Ne'eman reported that the EU may finance the
"evacuation-compensation bill."

The Jerusalem Post cited the hope of Israel and the U.S. that a new
IAEA report, which shows that Iran is continuing to enrich uranium
and is blocking the investigation of its program, will breathe new
life into efforts to sanction the Islamic Republic. Yediot cited
the Italian daily La Stampa as saying, based on a Western report,
that Iran plans to stage a breakdown in the Bushehr nuclear reactor
in order to accelerate its production of plutonium for military
purposes.

Leading media reported that yesterday a Palestinian terrorist who
stabbed an IDF soldier at Almog Junction in the southern West Bank
has been caught.

The Jerusalem Post quoted defense officials as saying yesterday that
plans to equip IDF tanks with the anti-missile defense system Trophy
have been postponed by two years due to budgetary and development
snags.
All media quoted the Reform Party of Syria, a pro-democracy
opposition party based in the U.S., as saying that Hisham
al-Labadani, Hamas chief Khaled Mashal's secretary, was shot and
killed in broad daylight in the city of Homs in Syria last Thursday.
Maariv surmised that Syrian President Bashar Assad, who opposes a
rapprochement between Syria and Iran, is behind the assassination.

Leading media quoted South African Archbishop Desmond Tutu as saying
on Monday that Israel may have committed a war crime by shelling Bet
Hanun in 2006, but that Palestinians were also at fault for firing
rockets at Israeli civilians.

Ha'aretz reported that the U.S., Israel, and the PA are discussing
extending geographical responsibilities of Palestinian forces in the
West Bank. The newspaper reported that DM Ehud Barak and the U.S.
special envoy for Middle East security, General James Jones, have
both rejected Palestinian PM Salam Fayyad's proposal to expand the
program to Hebron. However, they are considering expanding it to
Tulkarm. Ha'aretz reported that Barak, Shin Bet chief Yuval Diskin,
and other senior defense officials have all recently praised the
PA's performance in Jenin, where hundreds of Palestinian policemen,
including some trained by the Americans in Jordan, were posted to
enforce law and order. The IDF, for its part, cut back on
operations, eased traffic obstacles, and permitted Israeli Arabs to
enter Jenin. Palestinian forces were also allowed to operate in
rural areas around the city in coordination with Israel.

Ha'aretz quoted the rabbi of the militant settlement of Yitzhar,
Rabbi David Dudkevitch, as saying in an interview with the
newspaper: "The state stole Israel from the Jews." Ha'aretz
reported that the human rights group Yesh Din - Volunteers for Human
Rights demanded yesterday that the IDF investigate its soldiers'
failure to prevent a group of settlers (from Yitzhar) from attacking
and wounding eight Palestinians on Saturday.

A Ha'aretz/Channel 10-TV poll asked registered Kadima voters:
For whom will you vote?
First round: Tzipi Livni: 47% (47.2%); Shaul Mofaz: 28%; Avi
Dichter: 6%; Meir Sheetrit: 6% (5.4%); 13% are undecided.
Do you plan to vote?
Certain to vote: 70%; expect to vote: 24%; expect not to vote: 2%;
undecided: 4%.
Second round: Livni: 50%; Mofaz: 33%; undecided: 17%.

Maariv presented the results of a TNS/Teleseker poll among Kadima
voters:
Were the primaries to take place today, which of the candidates
would you elect as head of the party? (In brackets: People who are
sure they will vote):
Tzipi Livni: 42.5% (43.5%); Shaul Mofaz: 30.4% (28.8%); Avi Dichter:
9.6% (9.4%); Meir Sheetrit: 7.4% (6.4%); 10.1% are undecided.
If there is a run-off between Livni and Mofaz, whom will you
choose?
Livni: 53.1%; Mofaz: 36.3% (33.4%); 10.7% (9.6%) are undecided.

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Mideast:
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Summary:
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Senior columnist and longtime dove Yoel Marcus wrote in the
independent, left-leaning Ha'aretz: "Tzipi Livni, a brave and honest
lady who has evolved from a politician into a stateswoman, is the
woman of the hour. Israel has found a new kind of leader."

Deputy Managing Editor and right-wing columnist Caroline B. Glick
wrote in the conservative, independent Jerusalem Post: "If polls are
to be believed, Livni the fraud is just one fraudulent election away
from becoming our next prime minister."

Gershon Baskin, Co-Director of the Israel/Palestine Center for
Research and Information, wrote in The Jerusalem Post: "Despite what
many people believe or would like to believe or perhaps even hope,
Oslo is not yet dead and the chances for Israeli-Palestinian peace
have not totally faded away."

Block Quotes:
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I. "The Woman of the Hour"

Senior columnist and longtime dove Yoel Marcus wrote in the
independent, left-leaning Ha'aretz (9/16): "Israel's defense
problems cannot be resolved through armed intervention alone. The
dangers have changed. We are not talking anymore about wars between
countries in which we can be sure of a decisive military victory.
With threats like Iran and Hizbullah, we need a much more complex
range of responses than in the past, says [Tzipi] Livni.... Livni
sees one of her missions as building a social common denominator
that will also give minorities a voice. Livni is straight as an
arrow. She was the only woman minister at the powwow at Ariel
Sharon's ranch where officials decided to quit the Likud and form
Kadima, and she was the one who composed the party platform.
Nevertheless, she did not exploit her seniority and the prestige
that goes with it to demand a plum job, such as acting prime
minister, for instance.... While serving in the government, Livni
has also shown great courage. Not every day does a cabinet minister
get up and demand the prime minister's resignation (as she did in
the wake of the Winograd Committee interim report).... The gap
between her lily-white image and his troubles led him to respond
with personal vengeance, articulated in his decision not to resign
from the government no matter what, if only to keep her from gaining
any advantage in the race for prime minister by dint of being his
deputy.... Tzipi Livni, a brave and honest lady who has evolved from
a politician into a stateswoman, is the woman of the hour. Israel
has found a new kind of leader."

II. "Mrs. Clean Is a Fraud"

Deputy Managing Editor and right-wing columnist Caroline B. Glick
wrote in the conservative, independent Jerusalem Post (9/16):
"Foreign Minister Tzipi Livni may not be a crook, but she is a
fraud. And if polls are to be believed, Livni the fraud is just one
fraudulent election away from becoming our next prime minister....
The most blatant recent example of Livni's deceitfulness is her
behavior on the issue of sovereignty over Jerusalem. For the past
year, Livni has led the negotiating team with the Fatah faction of
the Palestinian Authority. In her position, she has been the
architect of whatever agreements the government has concocted
regarding the surrender of Judea and Samaria and parts of Jerusalem
to Fatah. Supported by the local media, Livni and Olmert have
denied the public the right to know what they are discussing on our
behalf and so prevented any public debate about their actions. This
is crucial for them because opinion polls show that their
presumptive plan to withdraw from some 98% of Judea and Samaria
[i.e. the West Bank] and partition Jerusalem is not supported by the
public.... She tells us that the cease-fire with Hizbullah she
crafted which paved the way for the Iranian proxy's takeover of
Lebanon was a diplomatic success. She tells us that we have no
option of victory over our enemies and the best we can do is beg
others to defend us. And she tells us we should give her the reins
of power because she tells us the truth. The public is powerless
today to do anything in the face of Livni's and Kadima's trampling
of our democratic system and open contempt for our national
interests. It can only be hoped that whenever elections are
eventually held, we will punish them for what they have done."

III. "From Oslo, Back to Oslo"

Gershon Baskin, Co-Director of the Israel/Palestine Center for
Research and Information, wrote in The Jerusalem Post (9/16):
"Despite what many people believe or would like to believe or
perhaps even hope, Oslo is not yet dead and the chances for
Israeli-Palestinian peace have not totally faded away. If and when
the possibility of peace does fade away, the Palestinian people will
no longer be calling for an independent Palestinian state in the
June 4, 1967 borders, they will be calling for democracy and
'one-person one-vote' between the river and the sea. When and if
that happens, we will begin to witness the beginning of a new era
which I would call the 'era of the demise of the Zionist
enterprise.' I only hope that our leaders and their leaders will
have the wisdom and the sanity to prevent us from jumping off the
brink into that abyss. The only way to prevent the next round of
violence, which will signal the beginning of the end of the
two-state solution, is to reach an agreement as soon as possible.
It may not be possible before the end of the Bush administration,
but the parties should already indicate their commitment to go
beyond that deadline into the beginning of the next U.S.
administration.... Fifteen years have passed since that hopeful day
on the White House lawn. We are no longer drunk with hope. We are
much more sober about our difficult reality and the fact that there
are still too many fanatics out there who would prefer mutual
destruction to making compromises and concessions for peace. So far
those fanatics have won, and in their winning they have transformed
the Israeli-Palestinian relationship into a 'lose-lose' unbreakable
embrace. The chance of a 'win-win' mutual liberation is still
possible -- but the price will be no less than what is written
above. There is simply no other way -- either we both win, or we
both lose."

CUNNINGHAM