(Communicated by the Cabinet Secretariat)

At the weekly Cabinet meeting today (Sunday), 27 August 2006:

1. The Cabinet was briefed on diplomatic and security matters.

Foreign Minister Tzipi Livni discussed developments regarding the stationing of an international force in the wake of the European Union meeting over the weekend. European countries have approved the dispatch of soldiers as follows: Italy – 3,000; France – 2,000; Spain approximately 1,000; Belgium – 394; Poland – 500-800; Germany, the Netherlands and Greece – naval units; and Finland – 200-250.

Regarding the implementation of UN Security Council Resolution #1701, Foreign Minister Livni said that the Europeans are currently talking in terms of days not months and added that preparations for the implementation of the resolution are more serious. Israel’s message continues to be that any delay regarding the force is liable to lead to a deterioration of the situation in the field and that as long as the embargo is not enforced, Israel reserves the right to act.

Defense Minister Amir Peretz discussed the ceasefire in Lebanon on behalf of which Iran has evaded the demand to suspend enrichment in order to cause rifts in the international community, and Palestinian affairs in which there is increased pressure in the Gaza Strip to advance a solution to the crisis against the background of a possible collapse of the Palestinian Authority and the increasing internal distress. He emphasized that Syria is working to minimize the damage of President Bashar Assad’s recent speech vis-a-vis more moderate countries and that Iran is continuing to play a main role in the reconstruction of Hizbullah’s capabilities. The Defense Minister also discussed IDF activities in the Gaza Strip.

2. Education Minister Yuli Tamir briefed ministers on the opening of the 2006-2007 school year, with special emphasis on the north. Following the subsequent discussion, Prime Minister Ehud Olmert said: "There is a series of issues that we must invest in above all in the Galilee and education is one of them. In this respect, we cannot hide our heads in the sand and say that we have returned to July 12. We certainly want to move forward on this issue and give priority to the Galilee which in any case is very high on Israel’s list of priorities but which, for many years, has not been translated into the creation of means and resources. This is one of our goals."

3. The Cabinet discussed the issue of security at educational institutions and on public transportation and amended a series of relevant decisions.

4. The Cabinet discussed the issue of special assistance and compensation for reservists who served during the fighting in Lebanon. In continuation of its previous decisions, the Cabinet decided as follows:

A. To pay reservists who served during the fighting in Lebanon from 12 July – 14 August 2006, either accordance with Defense Minister Peretz’s orders according to Article 34 of the 1986 Security Service Law or with call-up orders with non-standard advance notice time, and to those reservists who volunteered during the aforementioned period (hereinafter: eligible reservists) NIS 50 for expenses for every day served. This will cost NIS 65-70 million.

B. Finance Minister Avraham Hirchson will hold talks with the banking establishment and submit for Knesset Finance Committee approval the start of a state-guaranteed loan arrangement in accordance with the Committee’s 16.8.06 decision, also for small businesses owned by eligible reservists.

C. The Cabinet noted Finance Minister Hirchson’s statement that interest, indexation and penalties regarding VAT payments, income tax advances and taxation credits on wages that were due to be paid for June and July, on 15 July 2006 and 15 August 2006 respectively, will not be levied on eligible reservists.

D. Defense Minister Peretz will establish a Defense Ministry fund to deal – according to criteria to be determined – with aid requests from eligible reservists regarding, inter alia, economic damages incurred as a result of being called up on short notice, with emphasis on eligible reservists who own businesses or earn salaries, who are students, who have families, etc.  NIS 45 million will be allocated to this fund.

E. All of the foregoing payments will be in addition to regular compensation that reservists receive.

5. The Cabinet made a series of decisions regarding the medicines and medical services basket.

6. The Cabinet decided to apply the 1996 Goods and Services Price Supervision Law to hospitalization and ambulatory services.

7. The Cabinet approved Prime Minister Olmert’s appointment of Prof. Manuel Trachtenberg as his Economic Adviser.

8. The Cabinet amended a 1993 decision regarding development of Jaffa port.

9. The Cabinet discussed infrastructure development at the community of Shomriya and allocated NIS 2.2 million to the Construction and Housing Ministry in order to complete various projects.