Bar-On: Gov't to ensure savings
The government will act "immediately and decisively" to resolve any possible failure of Israeli markets, Finance Minister Roni Bar-On told the cabinet yesterday, in remarks aimed at reassuring the ministers and the public about the stability of the financial system in the wake of the global financial crisis.
"The Israeli government, out of concern for the public's savings and in order to guarantee the public's trust in the financial system, will back the financial system's stability," said Bar-On. "Israeli governments have demonstrated in the past, for 60 years, their commitment to doing so and the ability to act - and we will know how to act, in conjunction with the Bank of Israel, in any way needed in the future too."
If Israeli markets fail, "the government and the Bank of Israel will act immediately and decisively to quickly resolve such a failure," said Bar-On, promising the government would take steps to ease any credit shortage that might arise.
However, he said Israeli banks were not in danger of collapsing and that Israel was going into the imported crisis in relatively good shape.
"The present picture shows us that for now there is no fear whatsoever that any bank will collapse," said Bar-On. He said the country's financial system was "strong, with a number of years of high growth, low unemployment, and a proper and balanced budgetary policy."
The finance minister spoke as Israeli stocks flouted expectations by making up some of the ground they lost. The benchmark index of blue chips, the TA-25 index, ended the day with losses of more than 3 percent, after having been down double that in the morning. The index tracking the leading real estate companies lost 9 percent, an improvement over the 16-percent loss with which it started the day. However, the technology index was pulled down by stocks dual-listed on Wall Street and failed to rally.
The morning sell-off had been expected because Israel's investors had been essentially paralyzed since Tuesday, by the Yom Kippur holiday, leaving them unable to react while world markets continued to tumble.
Government intervention in the markets should not be discounted, said Bar-On, but he also warned against early intervention.
"I do not rule out intervention," he said. "That is part of the government's commitment, even in a free-market economy. But early intervention is no less problematic than intervening too late. I will not take actions which will create a crisis, mortgage the future or undermine the fundamentals of the Israeli economy. Experience from around the world teaches that not every tool used actually helps, and there are some that only aggravate the situation."
Traders ascribed Tel Aviv's resilience to assurances by Israel's economic leaders that the local banking system is sound. While Fischer refused yesterday to categorically state whether a safety net is or is not being laid out for long-term savers, he did vow that Israel's depositors wouldn't lose any money.
Prime Minister Ehud Olmert said there was no reason for Israel to fear the financial future.
"Some have called Israel's economic policies conservative," said Olmert. "In retrospect, everyone today acknowledges that conservatism is sometimes an advantage and not a drawback."
"Now we have to keep an eye on things to ensure the financial stability of the Israeli economic system," he said. "There is no reason to fear and no reason to act in a manner that is not judicious or rational."