The panic that has taken hold of Prime Minister Benjamin Netanyahu and his Likud party could endanger the economy's relative stability and drag it into a financial crisis. The public purse has been thrust open. All of a sudden, monthly pay for new police officers has been increased by NIS 2,000, the government has frozen gasoline prices, university students have been promised inexpensive dorms and half-price fares on public transportation, and the amount to be paid to elderly recipients of home-heating grants has been doubled. And that's just the beginning.
Netanyahu even unveiled a special ministerial committee that will meet with groups of protesters to hear about their distress and develop action plans. Under such circumstances, the sky's the limit. The Finance Ministry has already announced that the protesters' demands for state funding come to about NIS 60 billion - a fantastic sum.
Instead of opening the public purse, Netanyahu should assess the reasons behind the frustration of the middle class, which is breaking under the tax burden. The middle class has become the beast of burden carrying most of the economy. It pays high direct taxes. It also pays very high indirect taxes: value added tax, gasoline excise tax, purchase tax and high customs duties on food, making food prices here higher than in Europe and the United States.
The high prices are the result of the monopolies, cartels and other large groups that control the economy. There is not enough competition in the real estate sector (viz. the Israel Lands Administration ), in the food industry, and in many sectors such as retail, cellular telephony, banking, cement, the ports and the airports. That has to be dealt with, first of all, by introducing more competition into the economy, both domestically and via imports. Also, high customs duties must be reduced on imported food products.
The middle class knows that it is bearing the burden of the ultra-Orthodox community, many of whose members don't work, although they get inexpensive housing, day care at a nominal fee, stipends and other benefits. The secular middle class bears the burden of the West Bank settlers, who cost the state billions of shekels every year due to subsidized housing, half-price preschools and local authorities that are awash in money.
All this has to be fundamentally changed, not through dangerous allocations of state funding that could drag the country down to the level of Greece, but through a genuine change in priorities.
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