(Communicated by the Cabinet Secretariat)

At the weekly Cabinet meeting today (Sunday), 25.12.05:

1.  Prime Minister Ariel Sharon wished Israeli Catholics a Merry Christmas; he noted that he had spoken last night (Saturday), 24.12.05, with Catholic community leaders and asked them to convey his greetings to their communities.

Prime Minister Sharon noted that we will light the first Chanukah candle tonight and expressed the hope that the entire Jewish People would have a Happy Chanukah.  He said to Israelis: "Don’t overdo it with the doughnuts and the potato pancakes.  Eat, yes but don’t overdo it."

2. Defense Minister Shaul Mofaz and Foreign Minister Silvan Shalom briefed ministers on current security and diplomatic matters.

Defense Minister Mofaz said that the dominant factor behind the rocket fire was Islamic Jihad, which is operating in a context that equates reactions in the Gaza Strip with actions by our forces in Judea and Samaria.  Firing rockets and mortars at Israeli territory enables Islamic Jihad to bolster its status among the terrorist organizations in the Gaza Strip as a leader in the struggle against Israel, this in light of the fact that Hamas is continuing, as a rule, to refrain from dealing directly in hostile terrorist actions against Israel since it wishes to maintain the tahdia (declared calm) in order to be portrayed as a "responsible" organization ahead of the Palestinian elections.

Defense Minister Mofaz said that in wake of recent events, he has ordered the continued use of force pursuant to the determined counter-terrorism policy, while emphasizing focused counter-terrorist operations against those responsible for the aforesaid firing.  He has also ordered actions to reduce Palestinian movement in the Gaza Strip launch zones in order to deter – and ease counter-terrorist actions by our forces against – launching cells.  The Defense Minister stressed the continued ineffectualness of the Palestinian Authority (PA), especially its elements in the field.  In this context, he has instructed the IDF to prepare for a reality of continued escalation and a lack of control by the PA over events in the Gaza Strip.  He said that in light of the continuing terrorist threat posed by rocket and mortar fire, Israel will continue to act to implement the protection and security plan for the greater Gaza Strip area.

Defense Minister Mofaz discussed both the number of warnings and actions by our forces in the face of these warnings; he also discussed counter-terrorist actions by our forces.

Defense Minister Mofaz discussed the issue of the Karni crossing and the Rafiah crossing as well as current events in the PA, the situation in the north and the Iranian nuclear issue.

Foreign Minister Shalom discussed the upcoming PA elections and said that the international community, especially Europe and the US, was concerned about the possible results of the elections should Hamas increase its strength.  To this end, we heard warnings last week regarding a cut-off in aid to the PA if Hamas becomes involved in the Palestinian political system and becomes a partner in running the PA – without disarming and denouncing terrorism.

Foreign Minister Shalom said that while Israel certainly supports the PA’s efforts at democratization, it would continue to oppose Hamas’s participation in the elections.  Hamas continues to be a terrorist organization that champions the destruction of the State of Israel and as such has no place in any elections process.  He added that if Hamas participates in the elections, Israel could not remain indifferent and would be unable to assist the holding of the elections, especially not in Jerusalem.

Foreign Minister Shalom referred to the considerable weakness of Abu Mazen and the possibility that the PA elections might be postponed.

Foreign Minister Shalom discussed the first meeting by the donor countries since the implementation of the Disengagement Plan, which was held last week in London, at which it was made clear that special financing would not be given to the PA at this stage and that the donor countries would not convene again until the PA implements the required reforms.

Foreign Minister Shalom discussed the Syrian issue and the Melis report as well as the Iranian nuclear issue.

3. Finance Minister Ehud Olmert and Finance Ministry Director-General Dr. Yossi Bachar briefed ministers on economic issues in 2005.  They noted that the Israeli economy was growing and was in a good situation, that inflation was under control, that interest rates were reasonable, that more people were either joining the labor force or seeking to join it, that public and government debts were on a downward trend, and that the overall economy was stable and not affected by internal or external elements.

Bank of Israel Governor Stanley Fischer also briefed ministers on the economic situation and said that 2005 had been a good year with almost 5% growth and foreign investments of almost 10%.

Prime Minister Sharon said: "I congratulate Finance Minister Olmert, the Finance Ministry and Bank of Israel Governor Fischer on meeting targets while achieving growth that is among the highest in the western world.  I would be happy if we also met spending targets and government ministries would reach 100% implementation.  We will continue to plan and implement a responsible, growth-driven economic policy and we will utilize the benefits of the growth that we have achieved in order to achieve a better future, an improved quality of life and a higher standard of living for all sectors in Israeli society, with emphasis on personal security, education and support for weaker sectors.  I direct that economic discussions be held every two months in order to monitor progress in these areas."

4. The Cabinet discussed the issue of public sector positions that are exempt from public tender and decided that members of special rabbinical conversion courts will be so exempt provided that a special candidate search committee – composed of the Chief Rabbi responsible for conversions; the Civil Service Commissioner or his representative; the head of the conversion unit or his representative; a representative nominated by, but not subject to, the Chief Rabbi, with the approval of the Civil Service Commissioner and the Attorney-General; and a public representative nominated by the Director-General of the Prime Minister’s Office – will vet all members of such courts.

5. The Cabinet took note of Prime Minister Sharon’s announcement that he intends to appoint Tourism Minister Avraham Hirchson to be responsible for social and Diaspora affairs and the struggle against anti-Semitism.  The Cabinet also decided that the Tourism Minister will chair both the Ministerial Committee on the Restoration of Jewish Rights and Property and the Ministerial Committee on Diaspora Affairs.

6. The Cabinet commended outgoing Income Tax Authority Director Eitan Rub for his dedicated and professional work and wished him success in the future.