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Real estate tycoons investing in US and UK blamed for bringing investment crisis to Israel

In particular Israeli pension funds that helped tycoon Lev Leviev snap up Manhattan real estate, including the former New York Times building, in 2007 are suffering from his losses as property prices plunge, dragging down the value of corporate bonds that backed the deals.

Fellow billionaire property investor Yitzhak Tshuva has the same problem with his Delek Real Estate Company's investment in British property and roadside restaurants adding to a 73% drop in its bonds.

Pension funds and individual investors lost about $5.1 billion, or a quarter of what they had invested in corporate bonds, as yields fell in the four months to November.

Now, under threat of a strike by Israel's biggest union over pension losses, the government is proposing a bailout to help close the savings gap for people near retirement age.

'These real estate tycoons imported the global financial crisis to Israel. There's increased concern that these companies may default,' said Gill Beeri, managing director of Ramat Gan, Israel-based Ayalon Financial Solutions.

The country's 15 largest real estate companies have more than three times the amount of debt that they had in 2003, according to analysts.

It is predicted by the Bank of Israel that the economy in Israel will only grow by 1.5% in 2009, the slowest growth since 2002 and the end of a five year boom. Merrill Lynch has cut its estimate of 1% growth to nil.

Politicians want Israel to have more protection from toxic financial imports. 'There has been a group of businessmen that acted irresponsibly and with great greed. Long term savings have been thrown out of the window and there is a need for more oversight and regulation,' said Avishay Braverman, chairman of the parliamentary finance committee.