After two and a half years of deep economic crisis, the Israeli economy has shown a few encouraging signs. Imports of cars and electrical appliances have increased and private consumption is surging. There is a rise in the number of Israeli going abroad and there are even merchants and industrialists who are reporting a change in the atmosphere and forecasting a brighter future.
Finance Minister Benjamin Netanyahu is being cautious, promising growth only in another year. In internal meetings at the treasury, he talks of instituting a "supply-side economy" and a policy that will bring growth and he is indeed effecting a "supply-side economy" in every aspect.
Netanyahu has lowered income tax, opposes the suggestion by Minister Meir Sheetrit to raise capital gains taxes, and plans a series of reforms aimed at reducing the public sector and encouraging the private sector. Netanyahu believes that he is on the right track, that growth must be in the offing. But what will happen if despite his actions the figures indicate a deepening of the recession, poverty and unemployment? Netanyahu is already preparing an alibi for such an eventuality: the interest rates are to blame. Bank of Israel Governor David Klein is to blame.
To prove the interest rate's guilt, Netanyahu now wants to appointment an advisory committee for the central bank to do the job for him. Instead of him coming out publicly against the interest rate (as did his predecessor Silvan Shalom), Netanyahu prefers to remain on his high horse and not get his hands dirty. He therefore put Aharon Fogel - Klein's No. 1 enemy, and Jacob Frenkel's before him - at the head of the committee.
Netanyahu is dissembling, claiming that his goal is to get a second opinion on the Bank of Israel, one that will balance the system somewhat. But the committee that Netanyahu wants is not balanced. It is a committee with too many bankers, too many interested parties, who everyone knows very well will always oppose whatever Klein proposes.
Netanyahu should also know that Klein will not be impressed by this mini-parliament and will continue to do as he pleases, even slowing the rate of lowering interest rates because the uncertainty in the markets will increase due to the differences of opinion that will be loudly voiced in the media.
Netanyahu's alibi, however, is more important to him, so he is about to make his first big mistake, one that reminds us of the old Bibi, the manipulator. What a pity.
The right solution would be to back down from the appointment of the committee and instead to quickly implement the recommendations of the Levin Commission - to legislate a new law for the central bank, including the establishment of an independent council of governors that will be composed of professionals who will determine the interest rate policy together with the governor.
Although Netanyahu says that he believes the hudna will continue, and that this will help the economy to grow, he certainly knows that the symbolic release of prisoners this week does not satisfy the other side. He knows that practically nothing has changed in the insufferable living conditions of the Palestinians, even after six weeks of hudna. The roadblocks in the territories are still there, the inhumane queues at the Erez checkpoint are getting longer, the construction of the separation fence in the heart of Arab villages is cutting people off from their livelihoods and the abject poverty is growing.
Israel, for its part, continues on its way, recently issuing a tender for the construction of 22 housing units in Neveh Dekalim in the Gaza Strip, continuing to build bypass roads in the West Bank (such as in the Hebron Hills), and increasing the number of settlers.
As a result the hudna will go up in fire and smoke and the economy will be struck hard again and tumble back into a deep recession, with a drop in investments and the flight of the few tourists who still dare to visit this country. Then, in order to explain the chilly economy, the rise in unemployment and the worsening poverty, Netanyahu will point his finger at the interest rates: Klein is to blame for everything.
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