Honorable President and Mrs. Katzav,
Mr. Speaker,
Distinguished Knesset members,

I am honored to address the Knesset today, as the law requires, to report on the major government activities during the recent period, primarily those which are expected to take place during the upcoming Knesset session.

At the conclusion of our recent holiday we were all awakened, in shock and dismay, to a new height of horror which occurred in the Sinai terror attacks.  Again we had to grit our teeth and brace ourselves in the face of the inferno.  Again we had to make a terrible sacrifice to the “Molech” of terror, hatred and murder.

We were attacked twice: once because we are Israelis and because of the hatred towards us for insisting on preserving our right to live a normal life in a Jewish state of our own – to live in it, work in it and rest on our holidays.  And twice because we are part of the enlightened world, a world of free nations which champions liberty, tolerance and democracy as supreme values in contrast with the barbarity, tyranny and fanaticism which every terrorist all over the world worships.

The torch of liberty which we carry alone in the darkness of the Middle East is the one which the murderers seek to extinguish.  But it will not be extinguished, as we refuse to capitulate to violence.  We refuse – and we will always refuse – to abandon our lives as Jews, Israelis and free people, and we will never let go of the sword which defends the torch of our independence.

By standing in this house, which symbolizes more than anything the sovereignty of the Jewish people in the land of Israel and the liberty of our citizens in a democratic regime, we are defeating the ongoing onslaught against us.

In the coming weeks, this house will be forced to make difficult decisions, which are vital to the security, prosperity and future of the State of Israel.

The Government will submit for democratic decision the difficult issues which will determine the character of the State and the nature of our lives here in the coming years.

Such decisions are not easy.  We must also take into account those who oppose them and those who will be adversely affected by our decisions, and it is incumbent upon us to make an effort to understand them and relieve their suffering through substantial aid.

However, the duty of a national leadership, which is embodied here, in this house, is to make decisions using a broad national vision. The Knesset is the supreme institute of Israeli democracy.  As long as it has not made a decision, we are facing contention! Once it has made its decision – unity! A democratic decision by the majority of the members of this house is the key to creating a wide national consensus, which is the fundamental basis for the existence and success of the state.

Members of Knesset,

The IDF forces are currently operating deep inside the Gaza Strip, to foil and sabotage the shooting against the Jewish communities inside and surrounding the Gaza Strip.  Thousands of soldiers, together with members of other security forces, are risking their lives with courage and skill to enable the residents of Sderot, the communities around it and the communities of the Gaza Strip to maintain normal lives.  The area of civil confrontation in Israel has been shifting from one sector to the next, from north to south, from the city centers to the border settlements.  Every time it is a different population which is forced to shoulder the heavy burden.

The situation in Gaza has taught us that we cannot settle for active defense, assistance to the areas in confrontation or even IDF offensive activity.  It will be difficult for us to pursue them if Israel finds itself in a political stalemate, isolated in the international community.

The readiness of many members of the Security Council to denounce Israel for its defensive activities has taught us that the world is no longer interested in the question of who started and who is to blame.

The world is not too concerned by the firing of rockets and missiles at Jewish communities or by the murder of women and children.  Furthermore, it condemns us for our actions to protect ourselves and our children. This is the international reality.

Therefore it is important to guarantee that our friends in the world, primarily the United States, will stand by us and help us thwart the diplomatic campaign, while the IDF thwarts the terror campaign.  This understanding found expression last week in the American veto at the Security Council.  It exists only due to the fact that the United States knows that Israel has been acting, at its own initiative and with the widest possible international coordination, to produce a positive change.

The policy of my government has always been that there could be no political progress before the elimination of terrorism.  This principle was fully recognized in President Bush’s vision and in the Roadmap, and we are committed to it.

Israel adheres to its support of the Roadmap, which is the only plan to enable progress toward a viable political agreement.  This plan compels the Palestinians to take a series of practical steps towards the eradication of terrorism and a fundamental governmental reform, before progress can be achieved toward political negotiations. To date, the Palestinians have done nothing to abide by their commitments under the Roadmap.  On the contrary – they have increased the terror attacks, the violence and incitement in every sector, and have refrained from promoting reforms.  The blame for the political deadlock and their inability to progress toward a realization of their national aspirations rests solely on their shoulders.

Israel is interested in renewing the political negotiations under the Roadmap.  However, as long as the Palestinians continue to evade all the commitments made to us, the United States and the international community, regarding the fight against terrorism and comprehensive reform, there can be no progress on the political negotiations.

As long as there is no genuine partner for peace and until such time as there is a Palestinian partner who will fulfil all the commitments under the Roadmap and with whom we can enter into political negotiations and make progress toward peace, Israel is forced to take steps of its own to consolidate its political and international standing, improve its ability to provide security for its citizens and fight terrorism, and improve the humanitarian condition of the civilian population.

I reiterate and emphasize, the Roadmap was and is the only political plan accepted by the State of Israel, and we adhere to it. The negotiations in accordance with the Roadmap will be renewed only once the Palestinians fulfil all those prior conditions which I detailed.

It is for this reason that the Government initiated the plan to disengage from the Gaza Strip.  It is no secret that this plan is a source of great controversy among the public.  As I have promised in the past, I intend to submit this plan for Knesset debate and approval in two weeks time, on October 25.

The Knesset will hold an open discussion on the Government’s plan, at which I will present in full all the considerations which motivated the Government to initiate the plan. Each member will have the opportunity to review the documents, study the subject at length, express their opinion and vote. This is how a democratic regime operates. And it will be the first in a series of difficult decisions which the Government will submit to the Knesset during the upcoming session.

Mr. President, Members of Knesset,

After the Knesset approves the plan – as I believe it will – we can start implementing it in accordance with a practical and detailed timetable. This way we can carry out the decisions of the Government and Knesset during 2005, strictly monitoring the developments on the ground. We must preserve our ability to constantly examine the political and security situations and adjust our actions to the reality, in order to best serve Israel’s interests, primarily the ability to defend ourselves and confront terrorism.

The second decision which the Knesset will be required to make concerns the Relocation and Compensation Bill.

This Bill will be submitted to the Knesset during the first week of November, detailing all the arrangements for compensation to residents who will be forced to relocate their homes and their communities.

I know, and we must all realize, how difficult it is for a family to abandon its lifestyle.  After all, these are people who were sent to the Gaza Strip by Israeli governments.  Some of them have been living there for thirty years, some even more.  Each one built a home, raised a family.  Children were born there and people are buried there.

I know and understand their pain.  I know how difficult it is to leave a home which you built with your bare hands, a field you ploughed, a greenhouse you nurtured, a tree you planted, a garden you tended.  The land, the landscape, the memories.

I feel sorry for all those who refuse to understand it, those who rejoice at the uprooting, whose sole desire is to witness the images of Jewish settlers torn from their land. I, on the other hand, feel their pain, which is more real and more deep than anyone can imagine.

And I say to our brethren the settlers – despite all the harsh words and the stormy emotions – my hand will always be extended to them and my heart will always be open to them, to understand them and help them bear the changes which they will be forced to experience.

This is the reason I have chosen Yonatan Basi to head the administration – a man of the land, a devout man, a resident of the borderland, who knows and understands what I know and understand.  I have instructed him, and all those engaged in this matter, to act with the maximum sensitivity and generosity towards the settlers, and this is what we will do. From this podium I thank him for agreeing to take on this heart-rending mission, a mission which has torn his own heart too.

Ladies and Gentlemen, distinguished Knesset,

In the coming period, the Knesset will be forced to address not only political and security decisions.

I stated, even before I was elected Prime Minister, that Israel does not have the ability or the privilege to choose between the political-security banner and the socio-economic one.  It must wave both banners at the same time.

My Government inherited an economy which was on the verge of complete financial collapse, as a result of the global and local crisis of the year 2000. Not many are aware of just how close the economic waves were to drowning the entire economic ship in the vortex. We were compelled to take harsh emergency steps, which adversely affected many sectors of society.  We were forced to make cuts and were not always able to assist those among us who needed assistance, as they needed air to breathe.

We did not hesitate to tackle a series of subjects, which I can say – as one who has served as Minister in many governments in numerous capacities – have not been tackled since the establishment of the State.

I am convinced that this Government will be remembered as the most revolutionary government in the economic sphere in many years.

The reforms which we have carried out – and those we are expected to carry out in the coming year – curbed the deterioration and placed the market on a solid basis for growth renewal.

We acted in the capital market to rescue the pension funds and protect the members’ savings from huge deficits. We carried out a comprehensive reform in the work market, including extricating 40% of the foreign workers, and produced some 90,000 new jobs for Israelis in the past year. We reduced the tax burden on the middle class, and will continue tax reductions to reach every working citizen.  By this we have encouraged entrepreneurship and work in the marketplace. We renewed the momentum of foreign investment which is expected to reach $5 billion this year, while we are preparing for a comprehensive reform in encouraging capital investment and transforming Israel into a competitive factor in the global arena in this field. We privatized El Al and Zim and will continue with the privatization of the banks and Bezek this year. We have carried out a series of projects in the field of infrastructures, primarily the entry of natural gas into the electricity market and water desalination plants, some of which will become operative this year. We formulated a five-year plan, with an overall investment of 20 billion NIS, to develop the railway system in Israel.  The train connecting Tel Aviv and Ben-Gurion airport was inaugurated this week, a segment part of the train that will travel to Modiin, and from there to Jerusalem.

Mr. President, Members of Knesset,

We are currently at a crucial moment socially and economically.

The economic stabilization is complete with a steady interest of some 4%; the exchange rate is stable; inflation is negligible; there is increased foreign investment simultaneously with the guarantees which we have received from the United States Government; and there is growing confidence on the part of the international markets, as was manifested, inter alia, (and I suggest that everyone look into it) in the Economist rating, which placed Israel third among the rising markets.

The coming year could mark the turning point in the difficult transformation process from stagnation to growth, from recession and slump to a new period of growth and prosperity.

These trends find expression in the state budget which will be submitted for Knesset approval, during the first week of November. Approval of the budget and the reforms accompanying this budget is vital in order to achieve the required transformation.

At this point I declare the supreme national goal to be – after we have succeeded in stabilizing the market – the creation of new jobs, to alleviate the plight caused by unemployment.  In the second quarter of the year there were some 288,000 unemployed in the State of Israel, which constitutes 10.7 percent of the work force.  This rate is too high. All the government economic activities in the coming year are slated to begin reducing this rate to a tolerable level.

Creating work places in a modern market cannot simply be dictated by the Government.  What is required is an overall economic policy which will create for the market, primarily the private sector, the ability and incentive to produce more, sell more, export more, and thus create new work places for Israelis.

Therefore we will continue to direct resources to the productive market by continuing cuts in the public sector; increasing competition which results in business growth, privatizing and encouraging external investment, primarily in the field in which we enjoy a relative edge – the technological field.

We will continue the large structural reform, mainly a comprehensive reform in the capital market and the banking system, to reduce centralization.  We will also initiate a comprehensive reform in the Real Estate market, the main purpose of which is to best utilize Israel’s land reserves for growth, without unnecessary bureaucracy.

We have reached agreements with the leadership of the local authorities, which include the allocation of hundreds of millions of Shekels for a joint process of recovery and efficiency in local authorities.

Simultaneously with the economic reforms, in 2005 we will start the most important reform of all – education reform.

Our hearts were filled with pride last week over the extraordinary scientific achievement by the Israeli scientists who won the Nobel Chemistry Prize, Prof. Avraham Hershko and Prof. Aharon Chechanover. They prove to the world – but first of all to ourselves – the glorious achievements towards which the Jewish mind can lead us.

The Dovrat Reform, for the implementation of which we allocated 1.7 billion NIS this year alone, is the key to guaranteeing our moral future, concurrently with being a vital step towards closing social gaps.

Our goal is to provide every child in Israel with the best possible basis and equal opportunities to support themselves, contribute to society, but mainly – to realize all their talents and abilities.

Mr. President, Mr. Speaker, distinguished Knesset,

Just as in the political and security fields there are no difficult decisions which are not painful, the same applies to the socio-economic field.  The structural reforms constitute a fundamental change, and many workers feel, understandably, that they might be adversely affected.  I understand these concerns.

I am aware – perhaps more than some of the Government critics – of the difficulties and hardships that some of the citizens, certainly the weaker ones, experience daily.

I sympathize with the feelings of despair of those who have no employment and the anxiety of those who could lose their jobs and livelihood.

Therefore, all these reforms must be carried out through dialogue with the workers, but they also require their understanding that the reforms will be carried out – all of them, in full.

The attempt to paralyze the market by wild strikes will not succeed.

These strikes, primarily in the essential services, hurt the employees, mainly those from the private sector whose businesses are paralyzed as a result of strikes in the public sector.

It is therefore my intention to initiate a proposal to establish a system of dialogue and agreement between the Government, the employers and the employees, in order that we may carry out the necessary reforms and at the same time avoid any damage to the vital sectors of Israel’s economy.

I call upon you, Knesset members, to take an unequivocal stand: in the political sphere, as in the economic one, argument is allowed, protest is allowed, even cries are allowed, but what cannot be allowed is a devastating blow to our lives and our ability to act together to promote national interests.

Members of Knesset,

We are facing difficult decisions.  You are the national leadership of the citizens of Israel and therefore you will be required to make decisions and lead the public towards the implementation of those decisions. As I said at the beginning of my address – this is the essence of democratic
life: we part in contention until the decision is made, and once it is made, we unite in its implementation.

The Knesset is the elected institute and it alone will discuss and decide. We will all accept its verdict and act together, with true unity, to implement the decisions.

We have a mandate to decide,
We have a mandate to rule,
We have a mandate to act together, in full agreement, for the entire people of Israel.

Thank you.