When he was elected prime minister in 1996, Benjamin Netanyahu vowed that Israel's economy was just getting out of the blocks. Growth will come in 1997, he promised. Throughout the next three years, Netanyahu and Prime Minister's Office Director-General Moshe Leon promised time and again that growth would come "in the next quarter." The problem was that the economy itself wasn't listening, and Netanyahu's three years in office were marred by stagnation and falling investments.
Yesterday, like a cagey salesman of used goods, Netanyahu drew two lines on a drawing board. At stage one, he said, echoing his 1996 analysis, there will be cuts, and at stage two, growth will come. Once again, growth is only one year away.
Netanyahu's plan is plagued by an internal contradiction: Nobody is going to invest and open a new manufacturing plant during a time of war; and no would-be consumer is going to go on a shopping spree and "waste" money when his or her job is in jeopardy.
In the political sphere, Netanyahu is not prepared to accept concessions that could resume the peace process. Hence - no matter what Netanyahu predicts - insofar as things depend upon him, there cannot really be significant economic growth during the coming year.
During the past three years of crisis and growing economic deficits, Finance Ministry officials were forced to prune away sacred fruit, items which nobody dared touch in the earlier period of relative prosperity. The former finance minister, Silvan Shalom, slashed two such holy items: he imposed a stock exchange tax and reduced monthly family allowances. Netanyahu is now drawing swords against the holiest of holies: the defense budget. For the first time, the defense budget will in the coming years sustain relatively deep cuts - budget slashing not only will involve the dismissal of various security personnel, but also will influence the salary and work terms (including early retirement) of officials in the security system.
Another goal cited by Netanyahu yesterday involves providing "support for weak socio-economic groups, and improving the quality of life of citizens of the state." That sounds good, but reality is moving in the opposite direction. Average wage levels in the economy dropped 6 percent in 2002, and they continued to plummet by 5 percent during the first half of this year. Unemployment is not skyrocketing, but that's only because of large-scale recruitment of security personnel. Family allowances have been cut, we will pay more for health services, and our children will have fewer classroom hours. If this is "improvement in the quality of life," one wonders what bad times would bring.
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