The working group from the Prime Minister's Office, the Finance Ministry and the Bank of Israel met well into the night yesterday in an attempt to reach an agreement over a safety net for pension savings.
As the discussions dragged on, it seemed as though an agreement was within reach, but that it would support only a very limited version of such a safety net.
The proposal would only cover retirees with low incomes and would only extend for a short period in the near future.
The group is scheduled to present its recommendations this morning to Prime Minister Ehud Olmert, Finance Minister Roni Bar-On and Bank of Israel governor Stanley Fischer.
The deal is being worked out by the team, which includes four senior officials from the Finance Ministry: Director General Yarom Ariav; Budgets Director Ram Belinkov; Commissioner of Capital Markets, Insurance and Savings Yadin Antebi and Accountant General Yehoshua (Shuki) Oren.
The Bank of Israel's representative to the working group is Deputy Governor Prof. Zvi Eckstein. Prof. Manuel Trajtenberg, the head of the National Economic Council in the Prime Minister's Office, is also a member.
The team will most likely also include the need for changes in the structure of capital market regulation, though details have not yet been worked out. Such a recommendation was also included in the Bachar Committee findings, but was never carried out.
The Finance Ministry has continuously objected to a safety net, but it seems that treasury officials have reached the conclusion that if they do not compromise on the matter, Olmert will force a decision on them, which would spell much worse for the state budget. This seems to be the main reason why such an agreement now seems likely.
Cabinet discusses plans - but doesn't vote
At yesterday morning's regularly scheduled cabinet meeting, Bar-On explained the treasury's economic stimulus plan to his fellow ministers, though no vote was held on any of the proposals and no decisions were taken.
It seems that, aside from the treasury, everyone is waiting for tomorrow's recommendations on the safety net.
Basically, Bar-On has been repeating himself for the past few weeks, pushing the treasury's two economic stimulus programs: massive investments in infrastructure and a financial plan to increase the availability of liquidity to provide more credit.
Deputy Prime Minister Haim Ramon proposed at the cabinet meeting that any aid to companies whose bonds have plunged and are in danger of collapse must be conditioned on those firms being nationalized.
"It is unacceptable that public money will save private money without ownership passing into state hands. That is what happened in the bank shares crisis in 1983 and that is what we need to do now," said Ramon.
He also proposed an alternative safety net, which would guarantee a 3-3.5% annual return after inflation starting in 2003 or 2004 for those who would commit to not withdrawing their pension savings money before 2011.
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