Yair Lapid’s first months as finance minister have not provided adequate answers to the question of the nature of the economic policy he will pursue. The individual likely to exercise notable influence on the line he will follow is the person he chose to be director general of the Finance Ministry, Yael Andorn, the first woman ever to hold that post.
Upon entering office, Lapid had to cope with an immense budget deficit − NIS 40 billion − and take steps to reduce it immediately. From here, there and everywhere, a bevy of taxes, cuts and other harsh economic measures were scraped together, which made a more reasonable budget framework possible, and the 2013-2014 state budget was passed.
Treasury officials will not look back on it as a good budget, but rather as a harsh one, an unavoidable necessity. They will also remember Lapid’s promise that things will be better two years from now. It’s Andorn who has the task of cashing that check.
At the time Lapid appointed her, back in April, she was in her ninth month of pregnancy. When she gave birth (to her third daughter), the struggle over the budget was at its height. Andorn had to make do with an abbreviated maternity leave, which itself was frequently interrupted by phone calls from treasury officials and Lapid himself.
The patchwork budget that was eventually stitched together is a result of many constraints, both economic and personnel-related: the veteran treasury officials, the new officials appointed by Lapid and, of course, Lapid’s coterie.
Andorn is not a member of that coterie. She is a veteran treasury woman who was deputy director of the Budget Department when Benjamin Netanyahu was finance minister. After leaving the treasury, she was at one time the director of Amitim, which manages the Histadrut labor federation’s pension funds (and which the state nationalized in the wake of its failed management).
It is not easy to get a handle on Lapid’s socioeconomic outlook on the basis of his first months in office. The only element that sets him apart from his predecessors is the stubborn battle he waged on the issue of “sharing the burden” − intended to get the ultra-Orthodox to do army service and enter the workforce.
The results of that battle will be seen in the years ahead. The slashing of child allowances is meant to accelerate the process, which has actually been under way for some years already, albeit at a slow pace.
Whether the integration of the ultra-Orthodox into the labor force will be stepped up successfully is largely Andorn’s responsibility. The labor market is one of her two principal areas of knowledge and interest, along with the capital market. Her initiatives will focus primarily on those two spheres.
One urgent mission already awaits her in the capital market. She heads a committee, appointed by Lapid and former Bank of Israel Governor Stanley Fischer, to examine the debt arrangements in the Israeli capital market. This material is second nature for Andorn; indeed, as the head of Amitim, she was involved in a large-scale debt rescheduling for Zim, the shipping company.
The Finance Ministry consists of strong units (the Budget Department, the Accountant General’s Department, the Capital Market Department), which afford independence and considerable power to the officials heading them. So much so, in fact, that in some cases they leave the director general without the adequate tools or power to pursue a policy. As a result, many director generals leave no imprint on the ministry. The way to wield influence is by promoting economic reforms.
Andorn has everything it takes to be a director general who does leave an imprint: ambition, knowledge, experience, input in the appointment of key officials (she was responsible for the appointment of Amir Levy as head of the Budget Department, while the appointment of Dorit Selinger to head the Capital Market Department would not have gone through without her support), and a supportive finance minister who arrived with plenty of good intentions but without sufficient knowledge and experience.
These are good enough conditions for her to become the treasury strong-woman and, more crucially, to create a socioeconomic agenda that will address a number of urgent problems.
A vast number of challenges lie in wait. In addition to the capital market, there is the question of what to do about pension funds in an era of low interest rates and lengthening life spans. Other major issues include how best to deal with the huge natural gas revenues, maintaining a low rate of unemployment (with the global crisis still in the neighborhood and the rate of investments in the Israeli economy decreasing), and addressing the issues of inequality and the high cost of living.
To fulfill Lapid’s promise that things will be better here two years down the line, it will not be enough simply to provide maintenance and go through the annual ritual of budget battles over cuts, hardship measures and tax raises. What’s needed is a proactive approach combined with multiple reforms. The familiar
reforms (in the ports, the electricity infrastructure, the public service, open skies, etc.) are the seeds that will produce the fruits of growth in the years ahead. But still more is needed.
The challenges of the economy are far broader. Two of them are centered in Andorn’s two areas of expertise. The first is the capital market, in its broad sense, which includes the insurance companies, the pension funds, the stock exchange companies and the banks. It is in need of effective regulation in order to preserve its stability, but also to optimize the allocation of resources within the economy. That is not the situation at present.
Even greater challenges lie in the second area, the labor market. The integration of Arabs and Haredim into the workforce and more effective enforcement of the labor laws are part of it, but in the long term, the truly big challenge is to create an advanced, modern labor market that can respond to longer life spans, the growing frequency of global crises − which obligates the business sector to become more flexible − and, of course, the need for the working person to receive professional training throughout his or her working life, as well as social security and unemployment insurance in periods between jobs.
This is a vast project. It requires a thorough understanding of that market and of demographic trends, but also political capability and skill, and − above all − political support and backing. Andorn will be judged by how deep she plunges into these waters, and whether she succeeds in doing far more than just being the maintenance woman of the Finance Ministry.
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