Treasury building on 2008 safety nets
The Finance Ministry's contingency plan for a 2012 recession includes a safety net for retirees whose pensions are destroyed in a market meltdown as well as loan funds for small and medium-sized businesses.
Finance Minister Yuval Steinitz ordered his staff to prepare for a financial crisis worse than that of 2008-2009, including extreme scenarios. The plan is based on the ministry's conclusions from measures it proposed or took during the previous crisis.
Steinitz is the only senior ministry official who has been at the treasury since 2008. Therefore, the ministry officials are studying their predecessors' crisis preparations, and determining what worked, what's still relevant and what needs improvement.
One such measure is the safety net the ministry pulled together for pension savers. Ultimately, it did not need to bail out any retirees, but it believes steps should be taken in case it becomes necessary to implement such a plan. The main regulatory instrument that would have made such a plan unnecessary - forcing pension funds to reduce an account's risk, and thus its likelihood of losing a significant portion of its value over a short period, the closer a person is to retirement age - has still not been implemented.
One step considered particularly successful during the last crisis was funding for small and medium-sized businesses, and the ministry is planning to launch a tender to expand the two existing loan funds.
A measure that was considered particularly unsuccessful was a fund for investing in bonds of companies facing financial difficulties. The ministry may decide not to launch such a fund again, or may consider doing so differently.
Other measures under review include insurance for exporters and backing to help banks raise capital. The government ultimately never had to offer banks financial backing, but the ministry is likely to have plans in place for such measures in the future.
The ministry is not planning to unveil any of these plans unless there is a serious financial crisis.
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