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-à-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 background of continued discussion of
the withdrawal from Gaza.  However, Arafat’s voice is still stronger than
those of the moderates.  While the pre-emptive action 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.