Lost Confidence

Israel's financial woes

Israeli banks once boasted that they were "the economic oxygen of the nation." Today, however, the banks are struggling for breath along with the rest of that country's ailing economy. A bizarre financial crisis, triggered by last year's devaluation of the shekel, has shattered public confidence in Israel's lenders and forced them to slash services. With annual inflation running into three digits (190.7% in 1983), Israelis are accustomed to speculating on the government's frequent devaluations.

Last August, amid fears that the modest 7.5% devaluation would soon be followed by larger...

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