In its February 3 issue,

The Economist

examines a dichotomy in Israeli polling results and reaches a gloomy conclusion: The peace process may be doomed, for now.

While the majority of voting Israelis continues to support the peace process, opposition leader Ariel Sharon is slated to win the special prime ministerial elections scheduled for February 6, possibly by a landslide.

Although running on a platform of peace, Sharon's image is hardly dovish. Voters seem to welcome Sharon's assurance that he can halt the violence that resurged with a vengeance in late September, but at the same time, they wonder whether a Sharon win might not lead to a wider regional war.

Both Sharon and the incumbent prime minister, Ehud Barak, vow to bring peace to Israel. But during his stint as prime minister, Barak aroused anger and distrust among wide swathes of the people. He smashed taboos, as the prestigious British weekly puts it in a special report, and offered the Palestinians more than regular Israelis could stomach. In a two-man race, the alternative is Sharon.

Sharon has stated that if elected, he will form a national-unity government encompassing the two biggest parties: the one he heads, the right-leaning party Likud, and One Israel, the left-leaning party headed by Barak. But Barak has stated that he would not join a government containing right-wing hawks and religious extremists. Without One Israel support, Sharon's only option would be to create a narrow-coalition government containing exactly that - right-wing hawks and extremists. The only thing to be said of an extremise coalition,

The Economist

writes, is that it will probably collapse quickly.

But

The Economist

warns that neither a national-unity government nor a narrow coalition would lead to peace. A national unity government consisting of opposing left and right forces would be too paralyzed to make tough decisions, and a narrow right-wing coalition would not be inclined to anyway.

Investment banks have different spins on a Sharon win, which seems increasingly likely, according to polls. Merrill Lynch downgraded the Tel Aviv Stock Exchange and recommended that investors underweight their positions in Israeli stocks (while overweighting their positions in Egyptian shares, for a complete different reason: Egyptian shares are so cheap they're a good buy). The bank explained that a Sharon win would probably deter foreign investment in Israel. Goldman Sachs on the other hand predicts that the TA-100 index of the Tel Aviv Stock Exchange will gain 35% in 2001.