Israel's Cabinet met here yesterday to discuss a severe economic crisis and to hear a briefing on the American hostage situation in Beirut but made no decisions on the release of more than 700 Lebanese prisoners as has been demanded by the hijackers of the TWA plane.
It was widely assumed here that Israel would soon begin to release the Arab prisoners, most of them Shiite Moslems, from southern Lebanon.
The Cabinet meeting went into the early morning hours today in a fierce debate over proposed stringent austerity measures sought by Prime Minister Shimon Peres to halt the country's accelerating economic decline. It began before the 39 American hostages from the hijacked TWA airliner had left Beirut and it continued after they had reached Damascus.
The hijacking, and Israel's role in resolving it, were a secondary issue here yesterday and today as the Israeli government sought to come to grips with an economic decline that has continued and deepened despite earlier economic recovery programs.
Before the debate over the economy, the Cabinet was briefed on the hijacking crisis by Defense Minister Yitzhak Rabin.
Yossi Beilin, the Cabinet secretary, echoed Peres in saying that the freeing of the 39 American hostages would remove "obstacles" to the release of the mostly Lebanese Shiite Moslem prisoners being held at the Atlit Prison south of Haifa.
Rabin refused comment on the apparent climax of the 16-day hostage ordeal. "I don't make any comment on anything until the hostages reach Europe," he said. "Then we'll see."
Israeli television reported last night that the government here was to decide later today on how to respond to the apparent end of the hijacking crisis; the most likely way would be by authorizing the release of most if not all of the Arab prisoners in an unstated but clearly understood and crucial contribution to a resolution of the affair.
But as much as the hijacking continued to dominate the news in theUnited States, it was clearly a secondary issue here as Israel's government apparently attempted to come to grips with the country's economic crisis.
The economy and reported government plans to deal with the decline have been the lead items in virtually every Israeli newspaper for the last several days.
Israeli radio reported that Peres was threatening to bring down the national-unity government if the proposals devised by him and the Finance Ministry were not enacted.
The prime minister was also quoted as saying that any minister who publicly criticized the economic recovery program after it was enacted would be forced to resign, an empty threat, since Peres cannot fire other ministers, but a clear attempt to dramatize the gravity of the situation.
There were numerous reports about the measures Peres sought to force through the Cabinet. They included a 20 percent devaluation of the national currency, the shekel, steep price rises, a cut in government subsidies of basic commodities and the dismissal of up to 10,000 government workers.
When Peres took over as head of the national-unity government last September, an immediate three-month wage and price freeze was enacted. This was followed by a longer-term system of controlled wage and price increases.
These measures were called cosmetic by Israeli economists, but they were cited by the Peres government as stringent austerity moves in the process of winning the support of Congress and the Reagan administration for an emergency grant of $1.5 billion in U.S. aid that Israel is to receive this year.