Tax fears weaken shekel

Israel's currency is hitting new lows, driven down by investors' alarm at the prospect of fresh taxes to combat a swelling budget deficit.
On Wednesday morning the shekel sank 1.4% to a new low against the dollar of 4.85.

The cabinet this week agreed to a capital gains tax and a tax on savings interest, in the hope of raising 3bn shekels ($627m; £433m) to help close the gap in the public accounts.

No Israeli government has succeeded in introducing a tax on capital gains.

The West Bank incursion has hiked defence bills

But the current situation - with defence bills bloated by 18 months of Palestinian resistance and three weeks of armoured incursion into the West Bank, just as an economic crunch is reducing tax receipts - means desperate measures are needed.