In the period preceding the elections for the tenth Knesset, the Israeli economic situation deteriorated in a manner that aroused concern. IN 1980, the inflation rate reached 133%.In February 1980 the Lira was replaced by the Shekel, at an exchange rate of 1 shekel to 10 Lira. Minister of Finance Yigal Horowitz tried to implement conservative policies and reduce individual consumption, but his efforts came to naught, mainly for political reasons. In January 1981, Horowitz resigned from his position and was replaced by Yoram Aridor, an economist from the Likud.

Parallel to the deterioration of the economic situation, a series of cases of corruption at senior levels of the Likud and Mafdal came to light. With the resignation of the minister of finance after he failed to obtain support for his policies of restraint, it seemed inevitable that the government would fall. Menachem Begin decided to bring forward the elections from November 1981 to June that same year. The new minister of finance Aridor decided to "give the people a break". He lowered taxes on consumer products and eased restrictions of purchase of new automobiles and foreign travel, without reducing government spending. The result was a serious dwindling of the state's foreign currency reserves and a need to print Shekels. All this exacerbated inflation after the elections.
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Just prior to the elections, which were set for June 30, 1981, the Israeli air force attacked the Iraqi nuclear reactor near Baghdad. The operation destroyed the reactor and put paid to Saddam Hussein's nuclear program. Reactions abounded, both in Israel and the rest of the world, to the June 7 attack. Many accused Menachem Begin of using the operation to garner support and glory in advance of the elections. Begin denied this emphatically and played the historical card, claiming that his government had removed a tangible threat of destruction that had been hanging over the state. The operation earned Israel international criticism alongside admiration for the military capacity, and daring, to undertake such an operation so far from the state itself. It eventually emerged that Prime Minister Menachem Begin had consulted with Shimon Peres, leader of the opposition. Peres had cautioned Begin against the operation. Over time, there was increasing agreement that the destruction of the nuclear reactor had been necessary, especially since the window of time within which the reactor could be destroyed without causing a nuclear disaster in Iraq was rapidly closing and Israel could not have afforded to postpone the operation.

 

Shimon Peres was born in 1923 in Poland. In 1947, at Ben Gurion's request, he became involved in security affairs, particularly the purchase of arms from the United States. As director general of the ministry of defense, he cultivated cooperation with France, which resulted in the establishment of the nuclear reactor in Dimona. In 1959 he was elected to the Knesset as a representative of Mapai. In 1965, he and Ben Gurion left Mapai and formed Rafi. Later, he returned to Mapai, becoming a minister in 1970. His bid for leadership of the Labor party against Rabin was unsuccessful and he served as minister of defense in Rabin's first government. When Rabin stepped down, he led the Ma'arach in the 1977 and 1981 elections.  In 1984 he and Rabin made a rotation agreement with Yitzhak Shamir and he served as prime minister until 1986. In 1988 he was appointed minister of finance in Shamir's coalition government. In 1992 he once again lost to Rabin in competing for leadership of the Labor party. He served as foreign minister in the second Rabin government. Later, he brought the Labor party into Sharon's government, serving as foreign minister himself. In 2005, Peres resigned from the Labor Party and in 2007 he was elected president of the State of Israel..

 

A colorful figure who tried to win a seat in the Knesset in the 1981 elections was Victor Tayar. Tayar was a restaurateur from Jaffa who saw himself as a spokesman for the simple folk, the poor and downtrodden in society. He called his party Amcha and chose the symbol "zach" (meaning "pure") for his ballots, which reflected his commitment to clean politics and governmental transparency. Taya called attention to the distinction between himself and professional, seasoned, politicians. He portrayed himself as a simple citizen who spoke the language of his peers and was direct and uncomplicated. Born in Tripoli, Libya, Tayar was also an artist who worked in rehabilitation of convicts. His attempt to earn a seat in the 1981 elections failed. He also ran for election to the eleventh and twelfth Knessets, but never received more than a few hundred votes. Victor Tayar died in 1993. He is remembered by virtue of a law that bears his name. According to the Victor Tayar Law, a list running for the Knesset must pay its registration fees by means of a bank cheque. The law was enacted because Tayar demonstrated his "simple man" image by paying his fees in small coins.