Immigration to Israel, long a key driver of the country's economy, has fallen sharply amid worsening violence in the region and deepening recession.

The number of new immigrants fell to 15,000 in the first half of 2002, down 27% from the corresponding period of 2001, the Central Bureau of Statistics said.

The greatest slowdown was in arrivals from the former Soviet republics, which almost halved to 8,300 to account for 56% of all newcomers.

But immigration from crisis-hit Argentina rose sharply, reaching 2,500 people from 687 the year before.

Arrivals from Europe were 46% lower at 7,600 although immigration from both France and the UK increased.

Workers on strike

Israel is suffering severe economic problems, with unemployment around record highs and inflation rising.

Meanwhile, economic growth, foreign investment and tourism takings are all drooping.

Gross domestic product per capita is falling 3-4% a year, economists have said.

Earlier this week, the powerful Histadrut union held a symbolic strike, shutting banks, post offices and ports, as workers demanded pay rises to cover inflation.

The unions and the Finance Ministry are expected to resume negotiations later this month, but the ministry, conscious of the country's ballooning budget deficit, remains opposed to any salary increases.

Inflation is expected to reach as much as 7% this year.