Last Friday, Britain fell into recession. Today, it was the turn of Israel to accept reality. In 2009, the economy is expected to retreat by 0.2% – not much compared to the UK et al. There again, Israel had been charging along at 5.0% on average for several years.

Most of us already know it. The employment service has reported that over 17,000 new people were looking for work in December 08, compared to 10,000 12 months previously. Microsoft and IBM’s r&d centres in Israel will lay off workers next month.

Why? Global recession is now hitting Israel’s exports. VCs are choosing their next high tech conquests carefully. And a 22-day war has to be paid for, putting a strain on the budget.

Significantly, the Tel Aviv Stock Exchange took a different view. It rose over half a percent today. One reason is the next expected drop in interest rates, already down to 1.75%. But the investors are more savvy than that.

I suggest that there is another for optimism. And it also points to route out of the recession, which a bold new Israeli government must consider.

In the past week alone, I have visited 3 Israeli companies in the cleantech sector. Each possesses a simple but disruptive, patented technology, which will add significantly to Israel’s future wealth.

Now, I have written previously about Israel’s strength in this sector. Jerusalem alone contains many of the world’s new techs. in solar heating.  Globes has reported about investment opportunities in water technology.

The companies I met – water purification, biofuels and alternative heating – are linked by a key feature.  They require investment capital. Within a year this will be converted into hundreds of jobs and valuable export revenue.

Currently, Israel’s government is paralysed by the forthcoming general election. And the “Sir Humpreys” are still caught up in redundant concepts for promoting high tech. It will be months before a plan of action is approved and then implemented! As the Neros pluck their fiddles in Jerusalem, the country is calling out for action.

Take a risk. Hand out some short term loans. Give these companies a chance, and then sell out quickly as the venture capitalists return to play in 18-36 months.

Who benefits? The people; the environment, the treasury. Sometimes, the simplest solutions are the most effective ones.