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Isreal, post Olmert...

Vladimir Putin is no longer the only former secret agent that has risen to be Prime Minister of a nuclear power; ex Mossad spy Tzipi Livini has accepted Shimon Peres’s call to form a coalition government over the next 42 days replacing the outgoing Ehud Olmert who is facing prosecution for a series of corruption charges. It is clear that Livini will not be able to make the transition without friction as right wing parties have called for early elections instead.

If successful in forming a functioning coalition, Livini will be prime minister of a nation facing multiple challenges beyond the mounting tension over Iranian nuclear ambitions. The Israeli economy, largely dependent on the tech sector and other high value added industries, has begun to feel the impact of a cooling global market with Q2 GDP coming in lower than expected at 4.41% growth year over year. With CPI up 5% for the last 12 months Stanley Fischer, governor if the Bank of Israel, chose to raise the benchmark rate by 25 basis points for 4 consecutive months before pausing at 4.25%.

During the most recent monthly public meeting. Israeli bank leaders have made much noise regarding their limited exposure to toxic US mortgage markets to little avail as investors sold off financials on the Tel Aviv exchange in sympathy with Europe and the US.

The taxpayer bailout of the US financial system is beyond Ms. Livini’s control, but if she can successfully form a functioning government she may help Israeli stocks find their footing as investors decide that the glass is half full after all.

Andrew Barber
Director