Binyamin Netanyahu: New challenge

Some would call it a demotion - indeed, he at first told Prime Minister Ariel Sharon he would refuse the position in anger at missing out on the higher-ranking foreign affairs portfolio.

(Let alone at being distanced further from his real goal - regaining the job of prime minister which he lost in the 1999 elections.)

But Mr Netanyahu's last minute conversion allows him to extend a political CV which, even by Israel's churn and recycle standards, is markedly lengthy.

And it offers "Bibi", as he is known, control over Israel's happening portfolio.

In the West, no election is complete without tedious repetition of the idiom: "It's the economy, stupid."

Now, Israel's re-elected prime minister too is adopting the chant.

'Progress towards peace'

To outsiders, ongoing Israeli-Palestinian unrest may be Jerusalem's key problem.

Indeed, US President George W Bush said only on Thursday: "The new government of Israel ... will be expected to support the creation of a viable Palestinian state and to work as quickly as possible toward a final status agreement."

Israel's policy of promoting settlements in the occupied territories "must end", Mr Bush said, "as progress is made towards peace".

Real priority

But Mr Sharon, in a beginning-of-term speech to parliament, said the government's priority was to tackle Israel's long-running recession.

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"The first task of the new government will be to attack the economic situation... and to return to the path of growth," Mr Sharon said.

The Palestinian issue would be handled in "due time".

And to gauge the sharpness of Israel's economic pickle, consider that economic output fell by 1.1% last year - after declining by 0.9% in 2001 - visitor numbers slumped, and foreign investment slid by more than a third.

The question is how Mr Netanyahu can spice-up Israel's economic performance without that vital ingredient - political stability.

It is, after all, Palestinian unrest which has done so much to scare off foreign capital and tourist dollars, and undermine tax revenues, yet increase Israel's defence bill.

Policy cocktail

Mr Netanyahu's first move was, as a seasoned politician, characteristically political.

He accepted his new role only with the trimmings of extra powers over state companies - so allowing him to progress a privatisation drive, and help bolster government coffers.

He demanded control over loan negotiations with the US, so maintaining some control over foreign affairs.

And he won leadership of the socio-economic cabinet.

At a time when benefit budgets are being squeezed for cash to spend on military objectives, control over social policy will be key to Mr Netanyahu's economic revival agenda.

(He is, as an advocate of lower taxes, unlikely to rebuild social security spending.)

It was a cocktail which at least pleased Israeli investors, helping shares rise 4% on Thursday.

And it is an agenda around which Israel's new coalition government can unite.

Uniting factor

The partners differ on their attitudes towards the Palestinian problem, with orthodox parties opposed to the creation of a Palestinian state, and the secular Shinui party taking a less hardline stance.

But all agree on the need to tackle Israel's economic woes.

Mr Netanyahu may not have the most prestigious portfolio, but it is at least not lacking in profile.

A small improvement in Israel's economic fortunes would translate into a huge upsurge in his political capital.