The Bottom Line A Tough Act to Follow

You can criticize Netanyahu. You can be mad at him. But you have to give him this much: He was an excellent FM.

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You can criticize Netanyahu. You can be mad at him. One could say that he aligned himself with the far right. You can even charge that everything with him is political and personal. But one thing must always stand to his credit: He was an excellent finance minister, in the right place at the right time.

It's so easy to forget, but this was the Netanyahu who saved the economy in early 2003. We were then on the verge of a severe financial crisis after two years of a difficult intifada. Terror and suicide attacks raged in the city streets, the markets were depressed, interest rates were sky-high, and the state couldn't even borrow a dollar abroad. The intifada and accompanying terror attacks brought tourism to a screeching halt, caused investments to drop off and cut personal consumption. People were simply afraid to go to the malls. The result was bankruptcy, layoffs, wage cuts, a rise in unemployment - and a bitter recession.

Netanyahu altered the atmosphere the moment he entered the job. He began talking up a free economy, about competition, privatization, and the need to put the fat one, i.e., the public sector, on a drastic diet to allow the thin one - the private sector - to expand and provide new jobs.

In truth, this is what happened. The economy switched over to 4 percent annual growth and unemployment dropped significantly. Some 140,000 Israelis joined the workforce over the past 18 months.

Along the way Netanyahu executed an impressive series of reforms, which a good many believed had no change to be enacted. The greatest and most important revolution of all was the transition from the handout culture to productive work lives. To achieve this, he reduced guaranteed income payments and child allowances, as well as corporate taxes and what employers pay.

Later, he dissolved the economy's bottleneck when he dismantled the port monopoly into three competitive entities. He also waged a revolution when he detached the banks from the provident and mutual funds.

Of course, American guarantees, the calming of the security situation and the disengagement plan played a strong role in the turnaround, but it wouldn't have worked without Netanyahu. The problem is that Netanyahu has left in the middle - with tremendous irresponsibility, he has abandoned the economy and society, and the reform revolution has yet to be completed. Banking reform isn't a done deal. The ports are not yet privatized. The Israel Electric Corporation and Israel Airport Authority monopolies remain. The refineries have not been split up. The reform in Mekorot is incomplete. Bank Leumi has yet to be sold.

Enter Ehud Olmert, the new finance minister. His advantage is his support for disengagement, which will allow him to utilize the political horizon it will open. His test will be today's cabinet meeting on the budget. It's clear the size of the budget and the deficit will remain unchanged. Thus, the test will be in the field of reforms.

If Olmert passes the reforms in the meeting, it will be a clear sign to the market that the policy of competition, war on monopolies, the good of the citizen, and transition to a modern economy prevail. For this he has to convince the prime minister of the critical necessity of cutting the defense budget by NIS 1.5 billion, establishing a water authority, implementing the open skies policy, deregulating milk prices, launching digital TV broadcasts, implementing hospital reforms and making other important reforms.

If Olmert passes all the reforms, the result will be that some time in the future, when Netanyahu looks down from Heaven, at what happened, he simply won't understand how the economy continued to flourish - and did so at even a faster pace - despite his jumping ship.



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