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The path of budgetary responsibility By Haaretz Editorial Tags: israel news Even though the U.S. House of Representatives will apparently pass an $800 billion economic bailout plan today, international markets refuse to calm down. Their wild oscillations continue. Wall Street opened yesterday with a drop in prices, and here, too, the trading day ended with steep losses. It seems that the bailout plan is not a miracle cure for all of the American markets' ills. The bubbles that have burst - the credit, real estate and stock exchange bubbles - are so vast and threatening that even such a wide-ranging plan is not enough to revive faith in the markets. The collapse is the result of the great credit spree that took place in the United States over the past seven years. The public took out loans without thinking twice to buy houses, cars, electrical appliances and stocks. And the banks encouraged them to do so. Thus all three bubbles became so inflated that they finally burst. This has hurt everyone. Advertisement The bottom line is that the global economy is short on confidence, and that has led to a credit crunch. Money is the oil of the economy's wheels. And when the oil is used up, the wheels begin to creak - and then stop. At the beginning of the week, despite all the pressure, Congress rejected the bailout plan, leading to a collapse on Wall Street. The following day saw share prices rise, but on Wednesday, stocks again fell into the red. Yesterday, Wall Street opened the trading day with declines yet again. Over here, exchanges were closed for three days for the Rosh Hashanah holiday, sparing us, we believed, from the plunging prices. But no. Yesterday, the Tel Aviv Stock Exchange took a steep dive, as if to make up for time lost over the holiday. It seems that the American emergency plan is not returning certainty to the markets, and there are fears of the United States sliding into a downturn or even recession. As the Israeli economy is tightly bound to that of the United States, there are fears of a downturn here as well. Here, too, banks are cutting back on credit, the weak dollar is hurting exports and the public feels that its wealth is diminishing. All this leads to a reduction in private consumption. But let there be no mistake - the Israeli economy is entering this crisis in far better shape than the American one. Here, the budget deficit is negligible and the balance of payments is sound - the exact opposite of the situation in the United States. Moreover, Israel's economy is currently growing rapidly, and that, too, is a safety net. Here, bankers did not take the huge risks incurred by those on Wall Street, leaving our banks more stable, without fear that they will go under. Stanley Fischer, governor of the Bank of Israel, explicitly said as much yesterday. Our economy is small and flexible, and highly capable of adapting; it is therefore not expected to suffer as the U.S. economy has. We are located on the margins of the crisis, not directly in the typhoon's path. One of the key reasons for the Israeli economy's stability and growth is a responsible budget policy - namely, the government's insistence on refraining from big spending. Thus the government must now stick to this path of budgetary responsibility. That way, Israel's credit rating will not be downgraded, investments will not shrink, and the economy will be able to enter the crisis, and emerge from it, with minimal damage. Bookmark to del.icio.us   Forgotten peace French FM: I fear distracted world may forget Mideast peace process. Settlers vs. Shin Bet Daniela Weiss: Shin Bet behind attack on left-wing advocate prof. Sternhell

Read & React ADL: Financial crisis sparking anti-Semitic upsurge on Internet Responses: 353 UN General Assembly Chief: Some Security Council members are worse than Iran Responses: 99 Yoel Marcus: Israel won't top agenda for either McCain or Obama Responses: 70 Claude Kandiyoti: A red line is needed between Jews, Israel Responses: 97 Hezbollah: Ghajar, Shaba Farms will soon be liberated Responses: 101 Saudi cleric urges Muslim women to cover up all but one eye Responses: 62 More Headlines 00:56 Olmert to head to Russia for talks on missiles sale to Iran 23:26 Settler leader: Shin Bet behind attack on Sternhell 23:48 IAEA passes resolution urging Mideast nations to give up nuclear ambitions 22:26 French FM: I fear Mideast peace process could be forgotten 20:07 Palestinian Authority on alert for Hamas takeover of West Bank 22:12 VP debate / Palin beats the odds, fails to be field dressed by Biden 23:22 Fugee Friday Post III / From war-torn Sudan to a tiny classroom in south Tel Aviv 21:04 Iran: Natural gas conference in Tehran proof U.S., Israel pressure ineffective 15:08 Israel: North Korea supplying weapons to six Mideast states 16:57 Bush: Our economy continues to face serious challenges 19:16 Israeli Arabs mark anniversary of October 2000 riots 09:21 U.S. drops plan to set up diplomatic outpost in Iran 08:53 UN General Assembly chief: Some Security Council members worse than Iran 12:07 Saudi cleric urges Muslim women to cover up all but one eye Previous Editions Select Day 03 oct 02 oct 01 oct 30 sep 29 sep 28 sep 26 sep 25 sep 24 sep 23 sep 22 sep 21 sep

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