In a celebratory interview prior to the holiday, Accountant General Nir Gilad (the treasury strongman) revealed that last June, Israel faced a financial crisis equivalent to bankruptcy. An earth-shattering revelation, but not new. Anyone flipping through newspapers from late June 2002 will discover that virtually everything was already known then.
This newspaper published detailed descriptions (on June 14 and 16) of an emergency meeting held on Thursday, June 13 between Prime Minister Ariel Sharon , then-finance minister Silvan Shalom and Bank of Israel Governor David Klein. The meeting immediately followed Sharon's return from a Washington meeting with U.S. President George W. Bush; throughout his U.S. visit, Sharon received constant phone calls from Israel expressing concern about the sharp shekel devaluation. He was told that if he did nothing, Israel would find itself in a severe financial crisis that could include the collapse of the banking sector, and his rule would be imperiled.
The possibility of losing the premiership spurred Sharon into action and into a rescue mission. He called for the triumvirate emergency meeting at which he demanded Klein immediately raise interest rates to curb the plummeting shekel (a complete about-face for Sharon), agreed to cut defense spending (another drastic change for Sharon), and prevented the crash.
But a guest from Mars who were to read the interview in the Hebrew-language daily Yedioth Ahronoth would understand that the crisis erupted suddenly on one fine June day - and then was no more. The crisis was the result of a year-and-a-half of budgetary policy that lacked credibility, leading the public to hasten to transfer billions of dollars abroad.
And we have still not forgotten the three budgets the Finance Ministry submitted for fiscal 2002, as each time it became clear that the budget was unrealistic and the deficit higher than planned. We haven't forgotten the finance minister's promises that he wouldn't raise taxes - and they did go up. We haven't forgotten treasury officials' completely groundless growth projections for 2002 and how Shalom and other treasury higher-ups tried all along to lay the blame for the crisis at Klein's door. It is also not clear why Shalom, Uri Yogev, Gilad and Ohad Marani (each of whom is talented) submitted an irrelevant budget for 2003, a budget that now needs to be cut by NIS 11 billion.
Gilad said in the interview that "in 10 years, there will be those who look back and understand that one of the substantial achievements of these tough times was the maintenance of stability. There is now little public comprehension of the magnitude of that success."
Apparently it is with good reason the public isn't grateful to the national rescuers. That wasn't success nor was it stability. There was great chaos. It is true the treasury pulled back a meter from the precipice. But who got us to where we could see over the edge? To their credit, Shalom and the treasury officials did push through an important tax reform and touched welfare payments for the first time. But the central issue, the budget, needed much more courageous management - management of the kind that would have prevented June 13.
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