Bibi Netanyahu's supreme test was not the budget slash, or the struggle against Amir Peretz, or the pension funds reform, or even the cut in child allowances. The test was the Electric Corp. This is the strongest monopoly in the market, with the most organized workers' union, with the strongest threat: pulling the plug.
Company management did not make threats. Eli Landau and Ya'akov Razon tried to scare the public with stories that the electric system would collapse and the price of electricity would rise, since a split of the company would cause financing and operating problems. Every time they were pushed to the wall they said, "but the union won't take it."
The union, on the other hand, simply threatened to pull the plug. Had Netanyahu succumbed to the Electric Corp.'s pressures, it would have been obvious that he is a bully but is afraid of people with power, especially power in the Likud Central Committee. But Netanyahu did not give in. Beside him stood Ohad Marani, the director-general of the Finance Ministry, who strengthened him all the time. The directors-general committee headed by Marani was the one which recommended splitting the power company into three - production, transfer and distribution - with competition between the production and distribution companies.
If the legislative proposal that passed yesterday is implemented, we will have a more efficient, more developed electricity market in a few years (as was the case with communications). We will no longer be in danger of power failures, as we are this summer since private manufacturers hesitated to enter the business for fear of the Electric Corp.
The overall plan is in the right direction, but is not perfect. The public-sector slash has not solved the problem of the exorbitantly high wages of some top officials. The cut is only for two years, and then the wages will return to where they were. It would have been preferable to cut only at the top indefinitely and not harm the medium- and low-wage earners.
Netanyahu failed to effect the revolution he wanted in firing workers. The rules of the game were not changed. Managerial flexibility was not achieved, and government managers cannot fire or move people from their post, just as before. What he achieved was the dismissal of 750 workers, no big deal.
Budget-wise Netanyahu did not achieve his dream - a smaller government. The government budget is still too large. The deficit in this year's budget will range from 4.5 percent to 5 percent, too much. The cabinet committed itself to a 3 to 3.5 percent deficit in 2003. Therefore, today's deficit is NIS 22-24 billion. The moment the accountant general has to raise from the public such a huge sum to finance the deficit, interest rates will rise and the private sector will be ejected from the capital market, which will further oppress investments and activity and damage growth and employment.
The plan did not propose a sufficiently large cut to begin with, and considerable retractions were made even in the reduced version, causing a shortage of NIS 1.5 billion. The most infuriating concessions were made due to political pressure: the decision to cancel the NIS 40 million annual reduction in party financing, the political agreement between Meir Shetreet and Uzi Cohen to reduce the cut in the exorbitant number of deputy mayors, the elimination of uniting local authorities, and the scandalous retraction of canceling the religious councils.
Now perhaps, Netanyahu understands why he should have been much more insistent in the battle against Shaul Mofaz on the defense budget. He lost NIS 2 billion in this fight, which he needs so desperately now. Meanwhile, Israel's strategic situation has also changed: there is no threat from the eastern front and the sheriff is strutting around other Middle East backyards, not to mention the buds of negotiation with the Palestinians. Therefore, it is reasonable to assume that most of the NIS 1.5 billion should now be taken from the Defense Ministry.
Some of the concessions made to the social lobby were worthy, like reducing the cut in assistance to sick elderly people and canceling the old age allocations freeze. Some of them are not right, like the treasury's retreat on the issue of child allowances. The whole idea of equalizing child allowances is based on the position that large families should not be encouraged any more, because in many cases they cannot provide their children with a required minimum, and the children also are doomed to a life of poverty and squalor.
As far as the pension funds are concerned, a revolution has been achieved. It should be clear to hundreds of thousands of pension fund members that in about 15 years, there would have been no money to pay their pension, and therefore, this is a rescue plan. Granted, they will pay more and get less, but a bird in the hand is better than two which have already flown from the bush.
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