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Yesterday, the Finance Ministry hastened to deny a report in Haaretz that it was capitulating to the strikers over reforming Israel's ports, the most important of the structural reforms planned for 2004, dismantling the Ports Authority, and introducing competition to the sector.

The treasury's denial is heartening: We can only hope that the finance minister and his staff are still determined to implement their idea.

The Finance Ministry had promised by year-end 2003 to establish an authority under the Transportation Ministry that would be responsible for three government companies: one for each port - Haifa, Ashdod and Eilat. The treasury envisioned that three ports would compete with each other, thereby breaking the current monopoly riding on the business sector's back.

For all the treasury's vehemence, there is good reason to fear that in a year's time, when we look back, we'll find that all too many of its daring structural reforms were deferred, delayed, castrated, slashed back or simply shelved.

Timing is everything

The crown jewel of the treasury's economic plan for 2004 was structural reforms. Floating shares in government companies contributes almost nothing to Israel's economic growth. But structural reforms, mainly public sector cutbacks and the introduction of competition to monopolistic sectors, are a solid base for creating the conditions for growth.

While share issues depend mainly on the market's mood, structural reforms involve taking on some of the country's most powerful groups - groups that can flip the switch or, worse, have close ties with Knesset factions and parliamentarians.

Wait, wait. Whence such pessimism? Didn't the treasury manage to push through a huge reform, of the pension industry, after a decade of nothing but talk? Isn't that fact indicative of things to come?

Not necessarily. The main reason the pension reform succeeded was timing - May 2003. Remember that a year ago, Israel was wracked with uncertainties, and the stench of financial crisis was permeating the air. "The year 2003 is starting with the worst uncertainty Israel's economy has ever experienced," stated the treasury's director-general at the time.

And it was just 10 months ago that the Bank of Israel's foreign currency department director stated that the shaken public was refusing to lend the government money for the long-term, forcing the treasury to constantly shorten the duration of loans. The situation could even deteriorate to the point of Israel defaulting on its debt as Argentina and Russia did, the official warned.

That was the sentiment throughout 2002 and the first months of this year, creating a highly convenient background for the treasury's coup in reforming the pension funds. The sense of crisis stiffened the treasury's spine in its battle against the Histadrut labor federation, enabling it to enact a draconian reform that worsens retirement terms for hundreds of thousands of people.

Hoist with his own petard

The problem is that the treasury is falling victim to Netanyahu's resounding success in changing the sentiment in the marketplace. The treasury's struggle to push through structural reforms is about to fall victim to the perception that structural reforms were already carried out last year.

The moment Israel received the $9 billion American loan guarantees, the moment every investor in Israel and elsewhere grasped that Uncle Sam stands by its ally's economy - that was the moment the structural reforms became all but undoable.

Experience shows that reforms can be executed only when unopposed by powerful lobbies, only when their impact lies somewhere in the distant future, or only when the sword is hovering over our necks.

Which leads to Netanyahu's dilemma. On the one hand, he's a publicity hound dying for credit for the steps he's taken, hungry for headlines describing the upswing he triggered. That is the side that leads to his upbeat, bombastic statements to the press, to focus on economically meaningless operations like privatization, while playing down the tremendous boost from the American loan guarantees.

On the other hand, if he wants to be able to boast that he achieved genuine reforms, he has to go against his own nature and political urges and explain that the boom on the financial and stock markets is mainly due to the loan guarantees. He has to tell the public that his main contribution to date has been to design strategy, whereas implementation still lies ahead.

The euphoric mood, surging share price and privatization may lift Bibi's stock. But they do nothing but hamper the ambitious plans he promised to carry out.