It will force Israel to give up some of the aid it receives from the United States. If the economic trend suddenly shifts - if the markets go back to climbing and employment rises - then the financial aid can be maintained at its current level. But if the predictions of a serious financial ebb come true and millions of Americans lose their jobs, homes and savings, Israel will not be able to remain indifferent and insist on receiving an unaltered financial aid package.
To prevent embarrassment and pressure, Israel would do well to initiate an aid reduction itself, which the new prime minister should raise in his first meeting with the new president in the spring. It's better to determine the punishment yourself than to wait until the aid is cut by the Americans and suffer more.
In the next few months, the scope of the financial crisis will become clearer, as will the way America plans to resolve it. Last year Israel reached an agreement with the Bush administration under which it will receive $30 billion in military aid over a decade. The aid comes to $2.5 billion this year, $150 million more than the previous year, and will increase gradually until it stabilizes at $3 billion a year. The financial aid is about a sixth of Israel's defense budget, and most of the money is slated for purchasing planes for the air force. Israel is allowed to convert about a quarter of the annual grant from dollars into shekels so it can buy from local industry as well.
