The Bottom Line / Satiate the wolf
Klein cut the interest rate by that same old 0.3 percent - which isn't connected in any way to the situation of the economy.
Interest rates. Here was David Klein's chance to prove he isn't just stubborn, that he is sensitive to the situation in the economy, that he is willing to change. But Klein ignored the opportunity and cut the interest rate by that same old 0.3 percent - which isn't connected in any way to the situation of the economy.
When Klein took over as governor of the Bank of Israel, he reduced interest rate cuts first to 0.4 percent a month, then to 0.3 percent or 0.2 percent - or even 0 percent, in September and October. Someone at the central bank once said, "What does it matter, instead of reaching the target in a year we'll reach it in a year and a half, but with more certainty and stability."
But they were wrong. Conditions have changed and the recession is deeper, both in Israel and the United States. As a result, the chairman of the American Federal Reserve cut interest rates fast and the gap between interest rates in the U.S. and Israel has risen in the last few months. Inflationary expectations are low and the budget deficit is the only variable that threatens stability. However, this is a long-term threat and it is still not clear how high next year's deficit will actually be.
In the current situation, a real interest rate of 4 percent is too high and harms the economy. Therefore, yesterday's interest rate cut should have been far higher - 0.9 percent, for example, would have been reasonable compensation for September and October. With a higher interest rate cut the Knesset and the government would have been left with no excuses regarding the budget deficit and the populist laws. But Klein missed the opportunity to be Alan Greenspan for a while.
The docks. Ephraim Sneh yesterday ordered the Ports Authority to accelerate negotiations with Israel Shipyards to operate a private dock to unload bulk cargo. The Ports Authority received a similar order four years ago, but nothing has happened in that time. For six years, the owners of the dockyards (who rehabilitated them after they went bankrupt under government ownership) have been trying to get authorization to operate another dock, but to no avail.The Ports Authority doesn't want that, because then it would become clear for all to see how inefficient the state-owned ports are. The employees, for their part, object to another dock because they realize that as soon as it opens their monopoly will be cracked and they will even have to begin working hard. That's too much to ask.
So, the dockworkers union at the Haifa port hurriedly announced their vociferous objection to the operation of another dock in the Israel Shipyards and is threatening to call a strike at the port. Our politicians have a problem: How to avoid another strike at the ports and how to avoid the layoff of 580 dock workers.
We have a suggestion for Ephraim Sneh. Reach a quiet agreement with the owners of the docks that the navy and the Ports Authority will order a few ships from them, that the government will subsidize, on condition that they give up the idea of operating a private dock. That way the lamb will stay alive and the wolf will be satiated, and only the Israeli economy will suffer from prevention of competition. But that's not really important. Wait, what happens when the ships are built? By then we'll have a new transportation minister.