The economic program that the government approved last week will not get Israel's economy out of the woods.

Clearly, an economy embroiled in a protracted war cannot flourish. When tourism vanishes, businesses and markets stand empty because of citizens' fears of going out, when exports face political difficulties and production suffers from dwindling demand economic activity inevitably shrinks.

You don't have to be an economist or a strategist to understand the vast influence that an upswing in the region's security and political conditions would have. To say that peace would end the recession and restore economic growth is like saying that rain would end a drought.

The Oslo process gave the illusion that peace was at the gates and boosted the economy. But the most generous offer ever made by the government of Israel to the Palestinians - at Camp David and later at Taba in 2000 - led to the terror war that is going on to this day.

Thus far, the facts. Now for the questions: Is there a partner among the Palestinians Camp David- or Taba-like moves that could end the violence?

It is true that Israel isn't making any offer in this spirit now - and justifiably so: when a state is under pressure of terror attacks and voices are heard there demanding compromise and concession, a generous peace move will immediately become the starting point for far more extensive demands.

Moreover, a large camp among the Palestinians holds aspirations that threaten the very fact of Israel's existence, and what purports to be the mainstream among the Palestinian people has yet to prove that it has the desire and the ability to stop this camp.

Therefore there is no alternative but to absorb the terror war and strike at its perpetrators and those who back it until they learn that not only does the evil effort not yield the desired results, but also brings prolonged strife down upon them. We must learn from other peoples that wanted to preserve their independence and liberty and withstood longer and more difficult wars.

In this situation we must also do what is best for the economy. The first goal is to prevent decline in the form of galloping inflation, unrestrained devaluation, expanding unemployment, further decline in production and exports.

The economic plan approved by the government last week is a step in the right direction. Alterations might be possible here and there, but the general line is correct despite the harm that is also done to weak groups. The prime minister, the finance minister and the government ministers who supported the plan are worthy of admiration: To demand heavy sacrifices of the public (also in the context of steps that preceded the plan) in an election year, despite the criticism from all directions, is an act of true statesmanship.

However, all those who are trying to thwart the plan, first and foremost the Labor Party and Shas, are for narrow political motives harming a move that will allow the state to withstand the economic and military war for its existence.

The Shas ministers do not bear responsibility for the peace of the state, but Labor is a party with government experience and responsibility. How has it gotten caught up in the cheap populism that characterizes the critics of the plan? Has the lust to return to power made it lose its mind?

Let Labor MK Avraham Shochat, the former finance minister, lay his hand on his heart and say: If he were the finance minister in the current conditions, would he have proposed a plan substantially different from the one proposed by Finance Minister Silvan Shalom?

Would he have rejected the recommendations by the treasury to be stricter about eligibility requirements and the sums allotted to guaranteed income and unemployment compensation in order to cure the distorted labor market?

If he were prime minister, would Defense Minister Binyamin Ben-Eliezer not have insisted on cutting NIS 3 billion from the defense budget and not have backed up his finance minister in the socio-economic emergency program?

The message to the markets concerning the approval of the economic plan is conditional - the plan must be approved by the Knesset.

If it turns out that the chances of it being approved are negligible, the decline that the plan aims at preventing will begin. The early elections that the Labor Party is eyeing will also have a disastrous effect.

However, if the economic plan is approved and scrupulously implemented and the government continues in power and functions properly until the end of its legal term, there is hope not only for stopping the decline but also for the beginnings of an improvement. The economists at The Economist, for example, are more optimistic than the government of Israel; they are expecting 3% growth in 2003 (compared to the treasury's "working assumption" of only 1%).