Israel Primes for Renewed Gaza Fighting

Israel’s defense minister rallied troops to prepare for fresh battles in the Gaza Strip as negotiators raced the clock to extend a cease-fire that expires at midnight.

Both Israeli and Hamas leaders displayed pessimism yesterday over the prospects of turning the 72-hour lull into a more permanent truce after four weeks of violence that left more than 1,900 Palestinians and 64 Israeli soldiers dead.

“The shooting could restart,” Defense Minister Moshe Ya’alon said at a Navy base in Ashdod. “We have to be alert and ready.” Hamas said it wasn’t interested in another temporary cease-fire and would accept only a long-term deal.

The two sides, pressed by Egyptian mediators, failed over two days to close the differences in their bargaining positions. Israel insists on demilitarizing Hamas and other Gaza militias that fired more than 3,300 rockets into its territory. Hamas wants to ease border restrictions, free prisoners in Israeli jails and build a seaport on Gaza’s Mediterranean coast.

“The gaps are wide,” Finance Minister Yair Lapid, a member of Israel’s decision-making inner security cabinet, said in an interview on Channel 2 television.

Even with negotiations stalled, Israel and Gaza militant groups have maintained the truce that began Aug. 11, with no reports of rockets fired from Gaza or Israeli air strikes. The cease-fire, the second over the past week, is intended to give both sides time to resolve longstanding issues.

‘No Progress’

“The first cease-fire passed with no progress, and this is the second and final cease-fire,” Hamas official Musa Abu Marzouk said in a post on his Facebook page yesterday.

The official Voice of Palestine radio station said Israel’s demand to demilitarize Hamas-ruled Gaza isn’t on the talks’ agenda.

The shekel fell 0.7 percent yesterday to 3.489 to the dollar, its lowest since May 28. The benchmark TA-25 stock index, which has remained largely unaffected by the conflict, dropped 0.2 percent. Israel’s five-year credit default swaps rose last week to the highest since January.

The United Nations has estimated it will take $6 billion to repair the damage the fighting has wrought in Gaza, where 10,000 homes have been rendered uninhabitable by Israeli strikes. Schools, medical centers, mosques, a power station and water and sewage facilities were also hit.

Israel opened its military campaign in Gaza on July 8 with the stated aims of quashing rocket fire and destroying dozens of infiltration tunnels militants built to carry out cross-border raids. It says armed men account for 750 to 1,000 of the Palestinian dead and accuses Hamas of deliberately putting civilians in danger by operating within built-up areas and in and around schools, hospitals and mosques. The U.S. and the European Union classify Hamas as a terrorist group.

Tourism Battered

Deputy Bank of Israel Governor Nadine Baudot-Trajtenberg told Army Radio yesterday that the Lebanon war in the summer of 2006, which lasted a similar amount of time, cost the Israeli economy about half a percentage point in growth. Some of the current wartime expenses may need to be rolled over to the 2015 budget, which was already headed for a bigger deficit than planned, she said.

Israel’s Central Bureau of Statistics said yesterday that tourism was down 21 percent in July from a year earlier as a result of the fighting. The government’s July budget deficit quadrupled from a year earlier, in part because of the deferral of taxes to residents of Israel’s rocket-battered south and because of early payments to vendors in the area, the Finance Ministry said.

The UN Human Rights Council on Aug. 11 announced the formation of a panel of inquiry for the Gaza conflict, naming William Schabas of Canada, an international law professor at Middlesex University in London, as chairman.

Israel’s Foreign Ministry called the commission a “kangaroo court” and said it “proves without a doubt that Israel can’t expect justice from a body like this.” Israel didn’t cooperate with a UN inquiry into its 2008-2009 war in Gaza and hasn’t said whether it will deliver testimony to the new panel.

Before it's here, it's on the Bloomberg Terminal.