ISRAEL MEDIA REACTION

UNCLAS TEL AVIV 000632

STATE FOR NEA, NEA/IPA, NEA/PPD

WHITE HOUSE FOR PRESS OFFICE, SIT ROOM
NSC FOR NEA STAFF

SECDEF WASHDC FOR USDP/ASD-PA/ASD-ISA
HQ USAF FOR XOXX
DA WASHDC FOR SASA
JOINT STAFF WASHDC FOR PA
CDR USCENTCOM MACDILL AFB FL FOR POLAD/USIA ADVISOR
COMSOCEUR VAIHINGEN GE FOR PAO/POLAD
COMSIXTHFLT FOR 019

JERUSALEM ALSO ICD
LONDON ALSO FOR HKANONA AND POL
PARIS ALSO FOR POL
ROME FOR MFO

SIPDIS
E.O. 12958: N/A
TAGS: OPRC KMDR IS

SUBJECT: ISRAEL MEDIA REACTION

--------------
SUBJECTS COVERED IN THIS REPORT:
--------------

Mideast

--------------
Key stories in the media:
--------------

All media reported that the indirect talks between Israel and Hamas
in Cairo have failed to achieve a breakthrough that would free Gilad
Shalit in return for the release of hundreds of Palestinian
prisoners. HaQaretz surmises that, at a special meeting of the
cabinet on Tuesday, outgoing PM Ehud Olmert will say that "Israel
has drawn back its red lines as far as possible, but Hamas foiled
the negotiations. Under these conditions it is not possible to
reach an agreement." Major media reported that IDF Chief of Staff
Lt. Gen. Gabi Ashkenazi is cutting short his visit to the U.S. in
order to attend the meeting. (HaQaretz quoted IDF sources as saying
that AshkenaziQs action is not a reflection of optimism or pessimism
regarding the chances that the prisoner exchange will take place and
Shalit will be freed.) After two days of intense indirect
negotiations, Olmert's special envoy on the prisoner exchange, Ofer
Dekel, and Shin Bet chief Yuval Diskin returned from Egypt last
night. At a briefing for Olmert and his advisers, the two blamed
Hamas for what they called its unwillingness to show flexibility to
reach an agreement. Dekel and Diskin told Olmert that Hamas had
actually toughened its stance and that it returned to positions it
had held in the negotiations a year ago. HaQaretz quoted sources as
saying that at a certain point Diskin and Dekel sent over the final
Israeli offer. When the Egyptian officials returned with the Hamas
offer the two Israelis were shocked to realize that the Islamist
group had posed new demands. HaQaretz quoted a source as saying
that the two men had told Olmert: "They raised the demands of
someone who did not wish for a solution. The demands came out of
nowhere and there was a huge discrepancy between that and things
that had been discussed in the past." The media reported that most
of HamasQs demands revolved around several dozen prisoners that the
group wants freed, and over the issue of whether the freed prisoners
would be allowed to return home to the West Bank. HaQaretz reported
that a senior Egyptian source told the newspaper that there were
significant difficulties in the negotiations. The source said
progress in the deal depends on "political decisions that Israel
must make." The source was quoted as saying that the main dispute
was the number of prisoners released who would be expelled from the
West Bank. Hamas appears to agree to the expulsion of only five
prisoners on its list, while Israel wants to send dozens abroad.

Yediot and Israel Radio reported that PM-designate Benjamin
Netanyahu has asked President Shimon Peres to help him in the
coalition talks with Kadima and the Labor Party. Maariv reported
that the stances of those parties have not changed. HaQaretz
reported that, according to the government coalition agreement
signed between Likud and Yisrael Beiteinu, the government will be
committed to toppling the Hamas regime. The Jerusalem Post reported
that the agreement puts Yisrael Beiteinu Chairman Avigdor Lieberman
in charge of IsraelQs strategic dialogue with the U.S. on issues
such as Iran. Maariv reported that, in an interview with the
Russian news agency Interfax, Lieberman advocated defense
cooperation with Russia, in contradiction with the official Israeli
position.

The Jerusalem Post reported that EU foreign policy chief Javier
Solana told reporters in Brussels yesterday that the EU may
reconsider its links with Israel if the countryQs incoming
government is not committed to establishing a Palestinian state.
The Jerusalem Post quoted the Czech European Union presidency as
saying yesterday that there is a Qstrong European call to withdraw
from the Durban 2 conference if final documents do not take into
consideration the EUQs suggestions.

The Jerusalem Post reported that Netanyahu told representatives of
some 30 independent charities and NGOs yesterday that he was ready
to work together with them to beat the recession and continue
helping them to provide assistance to the countryQs weakest
populations. Maariv reported that all major Israeli banks suffered
losses following a reevaluation of securities and investments.


--------------
Mideast:
--------------

Summary:
--------------

Senior columnist Nahum Barnea wrote on page one of the
mass-circulation, pluralist Yediot Aharonot: QThe choice that Israel
is facing remains unchanged.... No matter what we do, we lose.

Military correspondent Amos Harel and Palestinian affairs
correspondent Avi Issacharoff wrote on page one of the independent,
left-leaning HaQaretz: QThere are Hamas demands, which Israel is not
prepared to accept.... The question arises whether Olmert's bureau
did not raise, with the help of the media, exaggerated, and
baseless, expectations.

The conservative, independent Jerusalem Post editorialized: QIsrael
must, at the very least, consider declaring a new, irrevocable and
sacrosanct policy: There will be no more lopsided prisoner exchanges
with terrorist organizations.

Military correspondent Alex Fishman wrote on page one of Yediot
Aharonot: QIf the Prime Minister indeed sends [negotiator] Ofer
Dekel for another round, he will have to send him with a mandate to
make another compromise on the issue of deportation [of released
Palestinian prisoners].

HaQaretz editorialized: QEven in a narrow government [Netanyahu]
will have to act as the leader of all the people and adopt a
statesmanlike approach, just as he did as head of the opposition in
the previous Knesset and as a candidate in the elections.

Block Quotes:
--------------


I. QWe'll Lose in Any Event

Senior columnist Nahum Barnea wrote on page one of the
mass-circulation, pluralist Yediot Aharonot (3/17): QThe gap between
[IsraelQs and HamasQs] positions is too large, and the time that the
Olmert government has left in office is too short. Out of all the
obligations that the Olmert government will be leaving behind for
the Netanyahu government to inherit, releasing Shalit is the one
that involves the greatest degree of heartache... . The choice that
Israel is facing remains unchanged: Either risk the chance of Gilad
Shalit's fate being the fate of [MIA] Ron Arad or risk the awful
security damage that will be wrought by those dangerous prisoners
once they are released. No matter what we do, we lose... The life
of an entire state cannot hinge on the fate of a lone soldier, no
matter how precious he is. That said, Gilad Shalit's continued
captivity by Hamas has become a national trauma, and it is the
nature of national traumas to become strategic problems. Netanyahu
empowered Olmert to conclude the deal. He was prepared to put off
the presentation of his new government, just so long as he might be
absolved of the need to decide on this most awful of dilemmas.
Nevertheless, it has been fated that he should be the one to have to
deal with this problem. We need to wish him luck at finding the way,
because the 1,000 days of Gilad Shalit's captivity are far-far too
many.

II. "The Gaps Remain"

Military correspondent Amos Harel and Palestinian affairs
correspondent Avi Issacharoff wrote on page one of the independent,
left-leaning HaQaretz (3/17): QYesterday's round of
Egyptian-mediated talks did not blow up, but neither did it lead to
an accord.... Although it was not expressly stated, it seems that
Tuesday's special cabinet meeting will not discuss a deal at all,
because there is no deal. There are Hamas demands, which Israel is
not prepared to accept. In light of the above, the question arises
whether Olmert's bureau did not raise, with the help of the media,
exaggerated, and baseless, expectations.... The fate of Gilad Shalit
has become a central topic of conversation in many Israeli homes
over the past few days. The question, Qwhat will happen to the
boy?Q is heard everywhere. The media is also enlisted almost fully
in calling for the release of the soldier, marginalizing opponents
to a swap. Support for a deal is legitimate, but even those who
support it should ask themselves if those calling for release at any
cost will be around to share the blame when some of those freed
commit new attacks.

III. QTwo Funerals and a Prisoner Exchange

The conservative, independent Jerusalem Post editorialized (3/17):
QBoth Jewish law and rational analysis should instruct Israel's
cabinet to conclude that this country must under no circumstances
release hundreds upon hundreds of murderous Palestinian prisoners as
ransom for our captive soldier Gilad Shalit.... [Yet,] generals and
spymasters are leaning toward jettisoning the no-nonsense strictures
of security in order to reunite Noam and Aviva Shalit with their son
Gilad. As the cabinet meets today, the hunt is on for the
Palestinians who shot dead at close range two traffic policemen
Sunday night near Masu'a in the Jordan Valley.... Granted, the
terror war against the Jewish state will continue regardless of
whether Israel does a prisoner deal or not. And yet setting these
incarcerated exemplars of Islamist values free would doubtless
provide an immense boost to enemy morale; for, paradoxically, in
Palestinian mythology shahids have a Qfuture,Q while those taken
alive and sentenced to rot in Israeli prisons are monuments to the
futility of waging war on the Zionist enterprise -- provided, that
is, that they are kept in those prisons, with the possibility of
their release arising only when the Palestinians make real peace
with the Jewish people. While the Shalits' campaign and the
Olmert-Livni government fumble, Prime Minister-designate Benjamin
Netanyahu's deafening silence is sending a message of acquiescence.
Yet however the Shalit dilemma pans out, Israel must, at the very
least, consider declaring a new, irrevocable and sacrosanct policy:
There will be no more lopsided prisoner exchanges with terrorist
organizations.

IV. QThere's Still a Chance

Military correspondent Alex Fishman wrote on page one of Yediot
Aharonot (3/17): QTheoretically, this government still has a few
days in which it can make history and set a precedent, either way.
But the announcement of the Prime Minister's Office last night,
saying that Hamas had backed down from all agreements, already hints
that Olmert chose the easy way: to accept Shin BetQs recommendation,
to wrap himself in the alibi of having made a Qconcerted effortQ and
to kick the Shalit affair over to the Netanyahu government.... it is
highly unlikely that by the end of today's cabinet meeting there
will indeed be a vote on any decision. It is more likely that the
Prime Minister will summarize the meeting in one of two ways: Either
he will declare that the current stage of negotiations have ended
and he leaves the matter to the next government, or he will announce
that he is sending his representatives for another round in Cairo.
If the Prime Minister indeed sends Ofer Dekel for another round, he
will have to send him with a mandate to make another compromise on
the issue of deportation. The problem is that in order to recommend
a compromise -- contrary to Shin BetQs professional opinion -- he
needs a great deal of courage.


V. "Statesmanlike in a Narrow Government"

HaQaretz editorialized (3/17): QLike Livni, who is steadfast in her
positions, Netanyahu has a right to adhere to his principles. Yet
even in a narrow government he will have to act as the leader of all
the people and adopt a statesmanlike approach, just as he did as
head of the opposition in the previous Knesset and as a candidate in
the elections.... Even though he came to power after the murder of
Yitzhak Rabin, he did not act as a unifying leader. Rather, his
conduct exacerbated domestic strife.... The formation of a
right-wing government does not obligate him to resume this approach
even if there is pressure on him to do so from within the coalition.
The national challenges require him to focus and adopt a
statesmanlike, unifying attitude rather than a sectarian-partisan
approach. It is possible to enact reforms without resorting to
incitement against adversaries. A statesmanlike posture is
especially important toward Arab citizens, against whom Netanyahu's
senior coalition partner, Avigdor Lieberman, orchestrated a racist
election campaign.

CUNNINGHAM