1983 in Israel

By the beginning of 1983, Israel remained deeply involved in Lebanon after the June 1982 invasion. Israeli forces were still deployed far inside the country, attacks against IDF personnel were increasing, and the withdrawal south of the Awali River would not be completed until September.[4] At home, the economy was deteriorating badly: high inflation, growing defense expenditures associated with the Sinai withdrawal and the Lebanon campaign, and loose fiscal and monetary policies adopted before the 1981 election contributed to what one contemporary account characterized as hyperinflation unprecedented in Israel's economic history.[5]

The Tel Aviv Stock Exchange had reached a registered share value of more than US$17 billion by the end of 1982, having more than doubled in real terms in a single year and increased fivefold since 1979.[2] That artificial boom, sustained in part by banks supporting the prices of their own publicly traded shares, would collapse with severe consequences in the year ahead. Against this backdrop of military entanglement and economic fragility, 1983 became one of the most turbulent years in the state's history.

The Kahan Commission of Inquiry submitted its findings on the September 1982 killings at the Sabra and Shatila refugee camps on February 7 and released its report on February 8, 1983.[6][7] The commission was chaired by Supreme Court President Yitzhak Kahan and included Supreme Court Justice Aharon Barak and Major General (res.) Yona Efrat; it held 60 sessions, heard 58 witnesses, and reviewed 180 staff-investigator statements from 163 additional witnesses.[6]

The commission concluded that the killings were directly perpetrated by a Phalangist unit and found no direct Israeli responsibility, conspiracy, or evidence that Israeli personnel participated in the killings.[6] It nevertheless assigned Israel indirect responsibility on the grounds that Israeli decision-makers should have foreseen the danger of a massacre, had failed to supervise the Phalangists adequately, and had not acted decisively when reports of killings began to arrive.[6][8] The commission stated that the exact number of victims could not be established with certainty; 460 bodies were found from September 18–30, while an Israeli intelligence estimate of 700–800 victims was described as possibly closest to reality, and claims that the number certainly ran into the thousands were rejected.[6]

The commission attributed specific failures to the most senior levels of the Israeli government and military. Prime Minister Menachem Begin bore responsibility for insufficient involvement after learning that Phalangist forces had entered the camps.[6] Defense Minister Ariel Sharon was found to have made a grave error by disregarding the danger of revenge and bloodshed and failing to ensure effective supervision; the commission recommended that he draw personal conclusions and that the prime minister consider removing him.[6][8] Chief of Staff Rafael Eitan was found to have failed to order measures to prevent the danger or stop the massacre once it began.[7] The commission also recommended that Yehoshua Saguy not continue as director of Military Intelligence and that Amos Yaron not serve as an IDF field commander for three years.[6][7]

Justice Minister Moshe Nissim presented the commission's conclusions to the cabinet, and Begin removed Sharon from the defense portfolio, although Sharon remained in the cabinet as a minister without portfolio.[7][9] The commission's formulation of direct and indirect responsibility remained politically and historically contested.

After approximately 35 negotiating sessions and ten days of intensive shuttle diplomacy by U.S. Secretary of State George Shultz, Israel and Lebanon signed an agreement on May 17, 1983.[10] The agreement declared the state of war between the two countries terminated, committed both parties to respect each other's sovereignty and territorial integrity, prohibited hostile or terrorist activity originating from either country's territory, and created a framework for civilian and economic relations.[10]

The security arrangements were detailed. The agreement established a Security Region in southern Lebanon, provided for the deployment of two Lebanese Army brigades there, and created joint Israeli-Lebanese supervisory bodies, with U.S. participation available in the Security Arrangements Committee.[10] All Israeli forces were to withdraw from Lebanon within eight to twelve weeks after the agreement entered into force, which required ratification by both parties.[10] Lebanon's parliament overwhelmingly approved the agreement with the backing of U.S. President Ronald Reagan, but it never entered into force.[11]

Accounts attribute the agreement's failure principally to Syrian pressure and the Lebanese government's political and military weakness, while a later account also points to disputes over whether Israeli and Syrian withdrawals had to occur simultaneously.[11][12] The agreement was formally shelved on March 5, 1984.[12] Sources variously characterize it as a failed peace agreement or primarily as a security arrangement that fell short of full normalization.

Throughout 1983, the Israel Defense Forces remained deployed across much of Lebanon while suffering sustained casualties. An IDF headquarters in Sidon was bombed, killing 36 Israelis.[13] On October 23, simultaneous terrorist attacks killed 241 American citizens and 58 French citizens in Beirut; the multinational force subsequently disbanded.[13]

In September 1983, the IDF withdrew south of the Awali River, completing the redeployment on September 4 after hundreds of attacks on Israeli soldiers and many dozens of Israeli fatalities during the preceding period.[4] The withdrawal did not end the violence. On November 4, 1983, at 6:00 a.m., a car bomb carrying approximately 600 kilograms of explosives entered a military compound in the Tyre district that housed the Israel Security Agency and Border Police.[14] The Israel Security Agency attributes the attack to members of Islamic Jihad and the Lebanese Resistance Front and records 28 Israeli security personnel and 31 Lebanese detainees killed, with 23 people wounded.[14] A separate account describes the bombing as signaling the beginning of full-scale guerrilla warfare by Shiite groups, some linked militarily and ideologically to Iran.[2] The Institute for National Security Studies gives a conflicting toll of 56 IDF, Border Police, and Israel Security Agency personnel for the event known as the Second Tyre Disaster.[4]

On November 23, 1983, six Israeli soldiers held by Fatah since their capture in Lebanon were released in a prisoner exchange.[15] Approved-source accounts differ on the scale of the exchange: one reports the release of 4,700 prisoners held in Lebanon and 65 held in Israel, while another gives 4,400 prisoners from Ansar camp and 100 security prisoners from Israel.[15]

On August 29, 1983, Menachem Begin announced his intention to resign as prime minister, telling his cabinet seven days later, "I cannot go on any longer."[1] He formally submitted his resignation on September 15.[1] Sources point to overlapping causes: declining health, criticism over the Lebanon war and its mounting casualties, and deep personal despair following the death of his wife, Aliza.[1] The Library of Congress country study also connects the resignation to failed policies concerning the 1982 invasion and the domestic economy.[2]

Yitzhak Shamir, who had previously served as Knesset speaker and foreign minister, became Israel's seventh prime minister on October 10, 1983.[1][16] Shamir formed a coalition comprising Likud, the National Religious Party, Agudat Yisrael, Tami, Telem, and Tehiya.[16] His government prioritized improving relations with the United States, stabilizing the economy, and managing Israel's increasingly difficult position in Lebanon while seeking to reduce casualties and maintain security for the Galilee.[16][17] The Library of Congress described Shamir as less charismatic and more cautious than Begin.[2]

The financial crisis of October 1983 was one of the most severe economic shocks in Israeli history. For years, major commercial banks had artificially supported the prices of their own publicly traded shares, and by the end of 1982 the Tel Aviv Stock Exchange had reached a registered share value exceeding US$17 billion.[2] As early as January 1983, most speculators had lost 50 to 70 percent of their stock value within days.[2] As the year progressed, hyperinflation — the annual Consumer Price Index rose 190.7 percent in 1983, compared with 131.5 percent in 1982 — drove investors to flee shekel-denominated assets in anticipation of a major devaluation.[18]

During the first week of October, panic selling accelerated. On October 6, the banks were forced to buy back more than $1 billion in their own shares.[19] The Library of Congress dates the exchange's closure and the "economic day of atonement" to October 6, while a bank-history account dates the government's formal closure of the market to October 9; both accounts place the resumption of trading on October 20.[2][19] The government devalued the shekel by 23 percent on October 11 and reduced subsidies; a contemporary account reports that many prices rose by approximately 50 percent overnight and that these measures intensified rather than arrested inflation.[20]

The government responded by intervening directly in the ownership of the banking system. It purchased shares of the major commercial banks from the public, assuming custody of them with the intention of selling them later; the banks covered by the arrangement included Bank Leumi, Bank Hapoalim, Discount Bank, I.D.B. Holdings, Israel General Bank, Union Bank, and United Mizrahi Bank.[21] The Bank of Israel records that the crash resulted in the government becoming the owner of almost the entire banking system, although it generally did not interfere with ordinary bank operations apart from appointing senior managers and directors and participating in some debt-restructuring plans.[3] A Knesset research publication states that four of Israel's five major banks were nationalized following the Bank Shares Crisis of 1983.[22] Accounts of the rescue differ modestly: one gives approximately $7 billion and a 17-day closure, while another describes $6.9 billion in stock taken over and a two-week suspension of trading.[17] The crisis subsequently became a major driver of banking reform, and privatization began during the 1990s.[22][23]

Finance Minister Yoram Aridor resigned amid the crisis.[5] Israel's balance-of-payments position was equally dire: the government deficit between 1982 and 1984 equaled between 12 and 15 percent of GNP, and the economy came close to exhausting its potential sources of short-term financing for balance-of-payments deficits in 1983.[2] Israel did not begin pulling out of both the economic crisis and the Lebanon war until the later national-unity government.[5]

The transfer of prime ministerial power was not the only significant political transition of 1983. Chaim Herzog was elected Israel's sixth president by the Knesset, defeating the governing coalition's candidate, Supreme Court Justice Menachem Elon, by a vote of 61 to 57 with two blank ballots.[24] Herzog had previously served as Israel's ambassador to the United Nations, represented the Labor Party in the Knesset from 1981 until his election, and headed the IDF Military Intelligence Branch.[25] He succeeded Yitzhak Navon and served as president from 1983 to 1993.[24][25]

On March 2, 1983, the Israel Medical Association began a four-month strike, described as one of Israel's largest and longest labor actions; doctors were protesting the government's refusal to grant a substantial pay raise after nearly eleven years.[26] On May 7, Palestinian factions led by Abu Musa mounted an unsuccessful internal challenge to Yasser Arafat's control during the First Lebanon War.[26]

On June 19, 1983, Simha Erlich died. He had served as deputy prime minister in Israel's first two Likud-led governments and had been born in 1915 in what is now southeastern Poland, where he was involved in a Zionist youth group.[26]

In January 1983, Avraham Marcus Klingberg, a senior employee of the Israel Institute for Biological Research who had access to highly sensitive secrets through his work with the IDF and the institute, was arrested on suspicion of espionage for the Soviet Union; he was subsequently convicted and received a life sentence.[14]

In July 1983, a cell of the Jewish Underground carried out a terrorist attack at the Islamic College in Hebron. The Israel Security Agency identified the network as responsible for earlier attacks against mayors in the West Bank — known by its original, indigenous Jewish name of Judea and Samaria — and ultimately brought 28 members to trial, including central Gush Emunim activists and Jewish residents of Judea, Samaria, and the Golan Heights.[14]

Ethiopian Jewish immigration to Israel was already under way well before the larger airlift later known as Operation Moses, which began in mid-November 1984.[27] A demographic study records 2,192 Ethiopian immigrants arriving in Israel in 1983.[27] By the end of that year, more than 4,000 Jews from the Tigre and Walqayit regions had reached Israel through the Sudan route.[27] Their arrival represented a quiet but meaningful chapter in the ingathering of Jewish communities from across the world during a year otherwise dominated by crises.

Amid the political and economic turbulence, 1983 also saw the establishment of lasting Israeli institutions. The Israel Space Agency was founded that year to promote familiarity with and use of space, initiate international ties, encourage research and innovative space-industry technologies, and coordinate Israeli institutions working in the field.[28]

In the technology sector, Efrat Future Technologies was founded in 1983 by Kobi Alexander and his brother-in-law Boaz Misholi. The company developed computerized voice mail, and the partners simultaneously registered Comverse as its American parent company.[28]

In broadcasting, the FM transmitter network previously used by Reshet Alef, the First Network of Israeli public radio, was repurposed in 1983 to create Kol Ha Musica, a new stereo classical-music and cultural radio network.[29]

Israel's population growth rate in 1983 stood at 1.35 percent — one of only two occasions between the state's establishment and 2025 when annual growth fell below 1.5 percent, the other being 1981, when it registered 1.42 percent.[30]

The crises of 1983 shaped Israel's subsequent political and economic course. The National Unity Government formed in September 1984 oversaw an IDF withdrawal to a security zone in southern Lebanon and curbed the runaway inflation inherited from the preceding period.[2] The bank-share collapse left the government owning almost the entire banking system, while later reforms reduced state involvement and privatization proceeded during the 1990s.[3][23] Several developments that defined 1983 were therefore resolved only through policies adopted in the years that followed.

Several of the year's pivotal events remain subject to differing interpretations. The Kahan Commission's formulation of Israeli indirect responsibility for Sabra and Shatila — finding no direct participation by Israeli forces while holding senior officials accountable for foreseeable risks and failures of supervision — has been evaluated differently across political and scholarly communities.[6][8]

Accounts of Begin's resignation emphasize overlapping factors to different degrees. The Library of Congress connects it to failed Lebanon and domestic economic policies, while the Jewish Virtual Library emphasizes declining health, criticism over the war, and grief after the death of his wife.[1][2] Inflation figures also vary according to the measure and period used: the annual Consumer Price Index rose 190.7 percent, while a contemporary account described inflation of roughly 100–120 percent annually from 1979 through 1983 and an annualized rate of about 125 percent in September 1983.[18][20]

The sources also conflict over the Israeli security-force death toll in the Second Tyre Disaster, giving either 28 or 56, and the available citations do not resolve the discrepancy.[4][14] The scale of the November 1983 prisoner exchange likewise appears differently across approved accounts, with totals ranging from approximately 4,500 to 4,765 Palestinian and Arab prisoners depending on which groups are counted.[15]