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Israel's Economy Is Mortgaged as Collateral for the Prime Minister’s Legal Woes

Netanyahu has an incentive to lock the country to prevent protests against him from growing, and somehow Kahol Lavan’s leaders follow, tanking the economy

Sami Peretz
Sami Peretz
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Sami Peretz
Sami Peretz

After the Jewish holidays thousands of Israelis will find themselves without a job to return to. The official reason will be the coronavirus but the real reason is the government’s wild and unprofessional conduct.

The starting point for cabinet discussions taking place on Wednesday night was whether to enforce a lockdown similar to that of March and April, or to tighten the restrictions to provide an answer to the data showing a catastrophic rise in cases.

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Prime Minister Benjamin Netanyahu had no clear position regarding what sort of lockdown he wanted to see. But there was one magic number that guided him through the debate: 30 percent. During the first lockdown over Passover, 30 percent of the private sector of the economy remained open for business.

This time the coronavirus czar, Prof. Ronni Gamzu, suggested leaving 50 percent of the private sector open. The trouble was that Netanyahu’s head could think of only one thing – how to prevent protests from continuing on Balfour Street.

Kahol Lavan and Attorney General Avichai Mendelblit made it clear that restricting protests could only be done if a decision were made for a much tighter lockdown than that imposed the first time around. The legal rationale was that if during the first lockdown protests weren’t barred when less than 30 percent of the market was in operation, then it wasn’t possible to prevent them during a lockdown in which much more of the market would be open. Therefore Netanyahu adopted a harder line, saying and then repeating, “I want to hit it with a hammer!”

The treasury prepared data simulations for the discussion, and chief economist Shira Greenberg presented a nightmare scenario by which an almost hermetic closure of the private sector (except for food and medicine) for the entire holiday season would cost the state coffers about 35 billion shekels ($10 billion). The previous number Greenberg had mentioned was 6.5 billion shekels. How did the figure shoot this far up?

That’s what happens when industry, banks, accountants, attorneys and high-tech businesses are also roped into the lockdown mix. These are branches responsible for a huge amount of economic activity and as far as we know, the rate of infection in its midst is very low. During the first wave nobody thought of shutting this sector down – but this time they found themselves in the line of fire because of the issue of the protests.

Somehow the 35 billion shekel number had an impact on all participants in Wednesday night’s meeting, and they understood that a hermetic closure of the economy would cause tremendous damage.

Greenberg and Finance Minister Yisrael Katz said that nowhere in the world was there such a tight lockdown. Thus the idea of a hermetic lockdown came off the agenda, and the discussion returned to the Passover plan – to allow a 30-percent opening of these businesses. Netanyahu asked Mendelblit if protests could be prevented with a 30 percent activity rate and he responded in the negative.

Throughout the presentation Kahol Lavan was divided. Some of them, like Minister Orit Farkash and Yizhar Shai, were boiling mad when they saw how Gamzu’s recommendation to leave 50 percent of the economy open was rejected. Party leaders Benny Gantz (speaking from abroad), Gabi Ashkenazi and Avi Nissenkorn were more cooperative and went with the flow of Netanyahu’s demand to reduce the protests, but only as part of a tighter lockdown.

Coronavirus czar, Prof. Ronni Gamzu, during a Knesset committee meeting, Jerusalem, September 16, 2020.Credit: Shmulik Grossman/Knesset

Politics played a key role for them, too. They knew that if they agreed to limit the protests they would be criticized, so they needed it to be packaged the right way: an emergency that requires tough decisions, the evidence being that most of the private sector of the economy would be locked down.

The bottom line of the process is that the finance, justice and health ministries are still working on is supposed to be based on two principles: It is stricter than the Passover lockdown in order to restrict demonstrations, but it will not be hermetic so as to avoid doing devastating damage to the economy.

How much will it cost? Nobody has any idea at this point. First, because as of Thursday afternoon there hasn’t been any clarity about which businesses would be shut and which would remain open. Second, nobody knows how long this lockdown will last. It has been set to cover the period of the holidays and will require renewed approval each week, but the government has no exit strategy from the lockdown and there are no numerical targets set for when it will end. When the number of daily infections drops to 1,000? 2,000? To 7 percent of the people tested?

There is no such target, so even if the 35-billion-shekel damage figure isn’t realized over the holidays, it still may happen and even get worse than that if the lockdown slides into the post-holiday period.

Many organizations begin preparing their work plans for the coming year right after the holidays. Generally, ideas start rolling before the holidays, and right afterwards decisions start to be made. After the current holidays the situation will be particularly complicated. It’s unclear whether we will see a significant change in the effect of the virus as a result of the lockdown, and nobody has any idea what will be done with the education system, whose reopening accelerated the rate of the virus’ spread. For as long as there’s a lockdown, it is difficult to see even what incentives the government will pay in grants to keep employees on the payroll of productive businesses.

Costumes depicting Benjamin Netanyahu (R) and Benny Gantz (C). September 12, 2020.Credit: Ohad Zwigenberg

Some cabinet ministers are worried about the creation of a linkage between the severity of the lockdown and the protests. The prime minister has an incentive to maintain the lockdown to prevent a resumption of the protests against him, and somehow he has allies in Nissenkorn, Ashkenazi and Gantz, who are ready to restrict protests only if the lockdown is very tight.

It sounds unreal and unimaginable for such a consideration to be affecting decision making, but when you listen to cabinet ministers (including those in Likud), you understand that it’s less inconceivable than it sounds. Netanyahu told the cabinet that the current lockdown will be stricter but that it can be eased up depending on the infection data. He didn’t say it, but the government fears that easing the lockdown will now depend on the data about the protests.

Thus, the government has mortgaged the economic futures of hundreds of thousands of people and business owners for the prime minister’s legal situation, which is what brought about the Balfour protests in the first place.

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