The shekel's rapid depreciation is not just a result of the recent 2 percent interest rate cut. It is also, and perhaps mainly, a resounding vote of no confidence by the citizens of Israel in the country's economic leadership.
Since the current government was established, the economic credibility of the prime minister and his finance minister have been continuously eroded. But over the past two weeks, the pair have managed to erase the last remaining drops of credibility.
Last Thursday, Ariel Sharon announced that he has reached an agreement with Silvan Shalom on the creation of a new committee to decide on future tax reforms. What committee? Which reforms? After all, the Ben-Bassat Committee has already studied that subject to death. Who needs another committee? Will the committee raise taxes? Drop taxes? Implement a tax on savings? Decrease income tax? The brouhaha over this new committee, including the wholesale leaks, will only serve to create more uncertainty - and in the end, or so it seems, the committee's recommendations will be rejected anyway.
That same day, Sharon announced that the state budget for 2002 would be passed by the Knesset "within a few days." But in the meantime, Shas has not agreed to have cut child allowances for large families, the Labor Party is sticking to its guns over the Negev Law and the war between Sharon and Shalom - with knives drawn - continues unabated.
When they were in the opposition, Sharon and Shalom supported every populist proposal that they stumbled across, including the Negev Law and the Large Families Law. When they crossed the Knesset to form the government last March, they did not revoke these laws, but allowed them to continue, as if they knew where the money was coming from. And now, having finally understood that the coffers are empty, they are changing direction. What sort of security and stability are they generating for Israeli citizens?
When, in September 2001, the 2002 state budget was approved, Shalom and Sharon called it "an excellent budget," which would bring rapid growth to Israel. Growth of 4 percent, no less. And now, just a few months later, they have been forced to lower the growth forecast to just 2 percent, and to cut that same "excellent budget" by NIS 6 billion. What are we to believe, then, when they call this new budget "excellent" as well?
The first week of 2002 has been and gone without any cutbacks or any projects to encourage employment, and the uncertainty just grows larger. So is it any surprise that the general public is afraid, and expressed its dissatisfaction in the most direct and blunt way - by buying dollars? The dollar, after all, is the last refuge during times of crisis and uncertainty. It has always been considered a stable and confidence-inspiring currency; a financial port in a storm. And over the last two weeks, some NIS 10 billion have found safe harbor in the dollar. The results are plain to see.
If the prime minister and his finance minister would only demonstrate leadership - by overcoming the objections of headline-seeking Knesset members, managing to pass the state budget before the end of this week and starting to implement the economic plans contained therein - the shekel's slide would quickly halt, and calm would return.
Want to enjoy 'Zen' reading - with no ads and just the article? Subscribe todaySubscribe now