Flags, Flare-Ups, Fiscal Troubles

While an ailing Begin lies in a bed of troubles

To the sound of national anthems and smartly clicking heels, an Egyptian soldier solemnly kissed his country's red-white-and-black tricolor and hoisted it in the place of the blue-on-white Israeli star of David. With that exchange of flags last week, under a blazing sun in the desert outpost of Bir Nasib, another slab of the Sinai Peninsula duly changed hands in accordance with the Egyptian-Israeli peace treaty.

It was the second of the six phased withdrawals prescribed by the pact. Israel ceded to Egypt a 2,500-sq.-mi. stretch of desert coastline and rugged inland mountains along the Gulf of Suez. According to the Israeli interpretation of the treaty, the hand-over was completed two months ahead of schedule, a reality that should have conveyed a sense of reciprocal good will. But, compared with the jubilation that accompanied Israel's pullback from El Arish in May, the ceremony this time was perfunctory. It was also overshadowed by a series of new Middle Eastern controversies and, most of all, by new political uncertainties in Israel.

In Jerusalem, baleful questions surrounded the precarious state of the health of Israeli Premier Menachem Begin. Begin, 65, who has a long history of heart trouble, was in Hadassah Hospital suffering from what was officially described as a blood clot in a small artery of his brain. It had cost him possibly the permanent loss of 25% of his vision. Doctors and aides alike insisted that the affliction was under control, with the help of anticoagulant drugs, and that Begin's mental processes remained unimpaired. They said that he was cheerfully reading and continuing to conduct government business from his bed.

They admitted, however, that bedside visits by officials and relatives had been sharply curtailed. Moreover, it was no longer certain that he would be well enough to be released after two weeks.

The Premier's aides did not attempt to mask their concern that his condition could worsen and conceivably even force his resignation. In a swirl of rumors, Israelis asked themselves if his health might not already be perhaps more impaired than his doctors would admit.

Jerusalem, meanwhile, was embroiled in fresh disputes with Washington. After Israeli F-4 fighter-bombers lashed across the Lebanese border on bombing strikes that left 20 dead and 60 wounded, the U.S. condemned the raids with unusual severity. The State Department pointedly noted that victims of the weekend attacks had included women and children. "Roads were filled with motorists returning from excursions to the beach and mountains," Spokesman Hodding Carter III declared, "and I would just say in the strongest terms that such raids must be stopped."

Nonetheless, within 24 hours Israel defiantly struck north into Lebanon again, this time with a ground assault that blew up a house suspected of harboring Palestinian terrorists in the frontier village of Majdal Silm.

The two allies were also at odds on how to replace the armed, 4,000-man United Nations Emergency Force, whose nine-month mandate to maintain peace in the Sinai was quietly allowed to expire last week in order to avert a Soviet veto in the Security Council. The U.S. proposed a compromise plan--carefully prearranged between Washington and Moscow--to deploy the unarmed observers of the 295-man United Nations Truce Supervision Organization in place of the U.N. Emergency Force.

The proposal was acceptable to Egypt, but not to the Israeli Cabinet. It accused the U.S., in effect, of reneging on President Carter's written pledge last March to provide an "acceptable alternative multinational force" to replace the U.N. Emergency Force, if necessary. The Israeli opposition to the plan appeared to be inspired partly by pique and partly by legitimate reservations. Angered by a superpower deal arranged over their heads, the Israelis complained that unlike the large, combat-ready Emergency Force, which was created by the entire Security Council, the team of observers would be responsible solely to U.N. Secretary-General Kurt Waldheim.

"There is nothing to prevent the Secretary-General from asking countries hostile to Israel to contribute troops," complained a senior aide to the Premier. Others grimly recalled 1967, when Secretary-General U Thant at Egypt's request withdrew U.N. forces from the Sinai, only to see hostilities break out almost immediately thereafter. At week's end, much of the sting was removed from the dispute when the State Department suggested the possibility of new four-cornered negotiations between Israel, Egypt, the U.S. and the U.N.

But even as Israel's international problems appeared to subside, serious national troubles cried for attention right outside Begin's hospital room. His illness was only a temporary shield from the political turmoil engendered by the harsh facts of Israel's runaway economic crisis: an 80% inflation that threatens to exceed 100% by the end of the year, a balance of payments deficit that is approaching $4 billion, a total foreign debt that has doubled in five years to $13 billion.

Illness or no illness, the opposition Labor Party planned to slap the government with a no-confidence motion in the Knesset this week, even though Labor Leader Shimon Peres conceded that it had little chance of passage. Embattled Finance Minister Simcha Ehrlich appeared to be barely weathering demands for his resignation. Factions of his own bickering Liberal Party, whose support is essential to Begin's Likud coalition, had earlier attacked him for withdrawing his proposed series of public spending cuts, which are considered necessary as a first step toward halting the inflation spiral.

With no solution in sight for Israel's economic crisis, Begin's government will be increasingly vulnerable to challenge from the opposition, from discontented Liberals and from restive members of his own Herut Party, like mercurial Defense Minister Ezer Weizman. Recognizing that it is all a healthy Begin can do to control his contentious Cabinet, Israelis wondered how long the ailing Premier could do that.

In the French Riviera resort of Cannes last week, a stocky, balding Palestinian holidaymaker strolled leisurely back to his luxurious rented apartment on La Croisette after a lucky evening at the roulette tables. As the elevator doors let him out on the fourth floor, two sportily dressed young men--one described as a tall, blond European, the other as a slighter, darker man who could have been North African--pounced from the corridor. After a scuffle and a shot, the Palestinian was left dying with a .32-cal. bullet in his head.

The victim was tough-talking Zuheir Mohsen, 43, who was both Military Operations Chief of Yasser Arafat's Palestine Liberation Organization and head of the P.L.O.'s Syrian-backed Al Saiqa faction. The assassination of the top guerrilla leader roused irate reaction around the Arab world. Syria blamed the "Camp David Alliance" of Israel, Egypt and the U.S. for the killing. The P.L.O. command in Beirut charged that the hit team had been dispatched directly from Begin's office. Mohsen's own Saiqa group accused the Egyptian secret service and its Israeli counterpart, Mossad, of having conspired in the killing.

Western intelligence circles had some other suspicions about whodunit. One theory involved a possible Egyptian vendetta for the recent Palestinian guerrilla seizure of the Egyptian embassy in Ankara, which Mohsen is said to have directed. Another was that he was the victim of a plot within the P.L.O., where Mohsen had numerous enemies because of his Syrian connection.

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