The Bottom Line / New York is ours
Did it really happen, or was it merely a dream? Could it be that something was done contrary to the will of El Al?
1. A crack in the skies
Did it really happen, or was it merely a dream? Could it be that something was done contrary to the will of El Al? Have the footsteps of the Messiah been heard? It appears so. Because yesterday, Tourism Minister Abraham Hirchson decided to allow Israir to begin operating regular scheduled flights to New York - despite stringent objections by El Al.
The decision was too long, way too long, in coming; but Hirchson decided to allow El Al to file all its reservations, appeals, and requests for stays so that his decision could not be overturned by the High Court of Justice on administrative grounds. Having witnessed a lengthy and exhausting hearing conducted with Deputy Attorney General Davida Lahman-Messer and senior economic experts, we can only hope that the High Court will not reverse the process.
Fortunately, Hirchson and Transportation Minister Meir Sheetrit have left the Likud for Kadima. Therefore, they are no longer sensitive to the intimidation and pressure of El Al employees, who threatened (a few months ago) to settle accounts with Hirchson in the Likud Central Committee if he dared to allow Israir to fly to New York.
Now, Sheetrit and Hirchson are faced with an even more important task - to open the skies to competition vis-a-vis Europe, thereby allowing El Al to operate flights within Europe, and European airlines, including low-cost companies, to fly to Israel without restrictions, which therefore would lead to lower prices.
Sheetrit and senior Transportation Ministry officials are still opposed to an open-skies policy under the anachronistic argument that it would spell "an end to Israeli aviation." We are fed up with threats and intimidation. The industrialists made the same arguments when they tried to prevent the opening up of the economy to competition from imports. It is time we fell in line with the Western world in the field of aviation too. The European Union is prepared to sign an open-skies agreement with us, and we must take advantage of the opportunity - for the good of all the people of Israel.
2. Inflation and interest
Once, not too long ago, reports about the rise in the consumer price index would have grabbed newspaper headlines; now, they are pushed onto the inside pages - an indication that we have finally achieved a state of normalcy.
The process began in 1985; but only in 1999, the final year of Jacob Frenkel's term in office as governor of the Bank of Israel, did we achieve a Western-like inflation rate of 1.3 percent. Since then, and through to today, price stability has been maintained, including during the harshest years of the intifada. True, there was an upward deviation in 2002 and a downward deviation in 2003, but all told, David Klein, Frenkel's successor, managed to teach the politicians and public that price stability is a prerequisite for prolonged growth.
Stanley Fischer thinks exactly like Frenkel and Klein. When he took office in May 2005, he refrained from adjusting the interest rate for a few months; but when he learned that the chairman of the U.S. Federal Reserve was raising interest in the United States, and he saw that prices in Israel were coming under pressure due to depreciation, rapid growth, and oil price increases, he raised interest in the last quarter of 2005 from 3.5 percent to 4.5 percent.
Did he go overboard? On the one hand, increasing the interest rate caused a reduction in the amount of money in the economy (as of November) and the reining in of inflation, so that 2005 ended with an inflation rate of 2.4 percent - very close to the middle of the target range. On the other hand, however, we have been living with negative inflation for the past two months, and January, too, will end with negative inflation - with February slated to end the same way, so they say. So perhaps Fischer exaggerated somewhat?
Under the current circumstances - with inflationary pressures nowhere in sight, the budget reined in, and the regime stable - there is no reason to continue to raise interest rates, even if Alan Greenspan ups the U.S. rate by 0.25 percent at the end of the month. Even then, the U.S. rate will only equal the Israeli rate.
Therefore, next Monday, Fischer should be expected to announce that interest will remain unchanged. Interest stability also has its advantages.