Bar-On reveals NIS 25 billion stimulus
Finance Minister Roni Bar-On introduced an NIS 25 billion economic stimulus plan yesterday, which was greeted by open opposition by many and grudging applause by few.
Global economic growth will severely slow in 2009, Bar-On said at a press conference yesterday; the plan's purpose is to minimize the damage to Israel and help it overcome the crisis quickly.
Not everybody agreed that it would work. While Prime Minister Ehud Olmert and Bank of Israel governor Stanley Fischer supported the plan, Big Labor did not.
"It isn't an economic program, it's a CYA program," said union leader Ofer Eini, threatening to call a nationwide strike to protest it after a late-night meeting with treasury director-general Ram Belinkov went nowhere. Meanwhile, Shas and Labor sources vowed to foil the plan's passage through Knesset unless it underwent substantial rebalancing.
"We are increasing total investment by the government and its corporations to NIS 21.7 billion, an increase of 41% compared with the scope of investment in 2008," Bar-On told the members of the Social and Economic Affairs cabinet. "I know that with this program, I step into the center of the political jungle. The claws were out and arrows were aimed before the program had even been presented, and certainly before it had been studied."
The plan is four-pronged: 1) Accelerated NIS 10 billion investment in infrastructure (from 2010), 2) Credit: Arranging NIS 1 billion credit for medium-sized businesses, NIS 550 million credit for exporters, NIS 180 million credit for small businesses, 3) Addition of NIS 350 million to state investment in research and development and 4) Strengthening the labor market by training and hiring subsidies.
Olmert told the assembly that his government had managed the economy responsibly, putting Israel in a good starting position to cope with the crisis. Olmert said his main concern was people squirreling money away. He urged that a package deal be reached, including a lifeline for pension funds, and approval of the 2009 budget as is, without fiddling.
Fischer applauded the plan and said the Finance Ministry did well to allow the tax cuts plan to continue. The government deficit will be higher than foreseen in 2009, Fischer said, but it must not be allowed to pass the boundary of 3% of gross domestic product.
MK Avishay Braverman of Labor, chairman of the Knesset Finance Committee, wants an alternative plan based on a bigger budget. "I call for an immediate assembly of representatives from unions, employers, the Bank of Israel, the Finance Ministry and the government to create an alternative plan and pass it through the Knesset," Braverman said. As for aid to pension funds, the ideas Bar-On presented were "too little, too late."
The Finance Committee meets next week to discuss Bar-On's plan, which at the moment does not enjoy majority support. Representatives from Shas, Labor, Likud and Meretz are all demanding that the program be expanded. That may have to happen. Shas leader Eli Yishai is demanding more help for people to buy homes, for one thing.
Ofer Eini, chairman of the umbrella Histadrut labor federation, had no good words for Bar-On's stimulus package.
"This isn't an economic emergency program, it's an economic cover-your-ass program," he said. "If you study the plan in depth you find it has no solutions to the crisis looming over the economy, especially not for the workers with the ax on their necks and their savings eroding by the day."
The plan offers no safety net for pension savings, Eini added, an issue for elderly workers who find they have to retire on much less money than they'd thought. Nor, said Eini, did the treasury find a solution to prevent layoffs, only ideas for workers already dismissed, some of which he said are "insane," such as turning fired high-tech workers into school teachers.
Nor does the finance minister ever bother to say where "the grandiose sum" of NIS 22 billion (or NIS 25 billion) would come from, the labor leader charged.
"As the minister is unwilling to increase government spending, it will come from budget cuts," he said.
Bar-On told the Social and Economic Affairs cabinet yesterday that he is confident Eini and Braverman will understand the need for the stimulus.
That was before the late-night meeting with Eini, though, who will be convening the leaders of Israel's big unions on Sunday. His intention is to declare a labor dispute because of the stimulus plan. By law, a strike can be called within two weeks of a dispute being declared.
Most of the private sector is not unionized and will not be affected, but the public service and government companies would be.