Communicated by the Cabinet Secretariat)

( At the weekly Cabinet meeting today (Sunday), 4.4.04: 1. Prime Minister Ariel Sharon extended his best wishes for a Happy Passover to the ministers, their families and the people of Israel. 2. Defense Minister Shaul Mofaz briefed ministers on ongoing security matters and noted that the current period is characterized by: * The continuation of a significant terrorist effort against Israel based on inter-organizational cooperation and increased input from abroad; * The weakness and passivity of the Palestinian Authority (PA), under the paralyzing influence of Chairman Yasser Arafat, amidst terror and anarchy; Defense Minister Mofaz referred to the disengagement plan and the systematic war against Hamas. During Passover, Israel is witnessing a high motivation by terrorist elements to perpetrate bomb attacks inside Israel. Israel has – in recent weeks – succeeded in blocking the preliminary retaliatory waves since the death of Sheikh Ahmed Yassin (), except for last Friday night’s attack at Avnei Hefetz. However, it is clear to the security establishment that attempts to perpetrate attacks in every way possible will continue; it is similarly clear that Hamas, and other groups as well, will make special efforts to perpetrate large-scale attacks.

Defense Minister Mofaz said that it is his impression that Hamas is under pressure and that the demise of Sheikh Yassin has caused a deep upheaval in the organization; cracks have appeared in the leadership and its leaders are acting like fugitives. However, it is clear that Hamas is looking for revenge; Israel is prepared ahead of this possibility. Defense Minister Mofaz called for maintaining daily routines while showing increased awareness and stepping up security at sensitive places. Foreign Minister Silvan Shalom briefed ministers on various foreign policy matters. Foreign Minister Shalom noted increased activity in the international arena regarding the disengagement plan and reminded ministers that US envoys met with European Union, Egyptian, Jordanian and PA leaders before coming to Israel. From contacts with US and European leaders and with UN Secretary-General Kofi Annan, it is clear that they view the disengagement plan as a means of increasing their involvement on the ground vis-?-vis Israel and the Palestinians. In the Palestinian areas, it is possible to discern relatively moderate voices approximately two weeks after the demise of Sheikh Ahmed Yassin and against the of continued discussion of the withdrawal from Gaza. However, Arafat’s voice is still stronger than those of the moderates. While the pre-emptive against Sheikh Yassin was criticized in the Arab world, in Europe and elsewhere, Israel has discerned no significant changes in the approaches of key countries to items on Israel’s agenda. Foreign Minister Shalom said that the European report on anti-Semitism in Europe obligates European governments to take urgent steps to deal with the problem not only with words but also with actions. Finance Minister Netanyahu briefed ministers on economic matters and detailed additional steps that are being taken to accelerate growth in order to reduce unemployment and create jobs. The Finance Minister discussed: * the reduction of taxes for low- and middle-income earners; * a multi-year reduction of taxes on companies; * the encouragement of the construction sector; * the encouragement of capital investments. 3. The Cabinet proposed that the Knesset – in accordance with article 38 of Basic Law: The Government () – declare a state of emergency for one year when the current state of emergency expires on 10.6.04. A state of emergency has been continuously in force in Israel since May 1948. BPI.