The government’s intensive discussions over the weekend on a strategic exit from the coronavirus lockdown has revealed an unpleasant fact: The government had it a lot easier putting the country in a lockdown than restoring normal economic activity.
The lockdown aims to flatten the contagion curve so that hospitals aren’t overwhelmed by a rapid rise in the number of sick. The math was clear enough and so the goal was achieved.
Bibi's got the perfect exit strategy - just not for the coronavirus
The hospitals have performed well and have been able to handle the patient load. The number of ventilators is 10 times the number of patients who need one, and demand would have to grow enormously for the system to collapse.
So, the economic-policy establishment now wants the state to pay more attention to the other sick, namely businesses, the self-employed and the hundreds of thousands of Israelis who have lost their jobs.
There are two ways the economic pandemic can be treated: Either restore economic activity to some semblance of normality or print money and keep pumping government funds into the economy to help those who have been hurt. The treasury and the Bank of Israel naturally prefer the first option. The treasury estimates that every week Israel is in the kind of lockdown it was until this week costs the economy about 10 billion shekels ($2.8 billion).
But actually the damage is bigger than that because every week the lockdown is extended reduces the number of businesses that will be able to reopen and the number of people now on unpaid leave who will keep their jobs.
For that reason, it’s surprising that Prime Minister Benjamin Netanyahu has sided completely with the Health Ministry’s draconian policies, despite the economic costs they impose. The end of every meeting on a strategic exit ends with a decision to delay a restart to the economy.
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This week, the exit starts the process but very gingerly – businesses making up 30 percent of the economy will be allowed to resume, subject to severe regulations, and only a limited number of retailers can open their doors.
Naftali Bennett the wonk
At the latest round of meetings, experts representing all the relevant disciplines were in attendance, like epidemiologists, mathematicians and statisticians. The fact that ministers and other top decision-makers are so reliant on them reflects the uniqueness of the coronavirus pandemic and the uncertainty surrounding it. Decision-makers – above all Netanyahu himself – face a difficult challenge in not making critical mistakes.
One mistake would be to restart the economy, let people go back to work and reopen the schools only to discover that the statistics are worsening again. The experts are supposed to assess the options and risks.
On Thursday night, Defense Minister Naftali Bennett presented a mathematical model based on conversations with epidemiologists and said the number of coronavirus patients needing ventilators was 140, compared with 1,600 available devices. The health care system, he said, was in no imminent danger of collapse.
Bennett proposed a “traffic light” model – the theoretical traffic light would be green if over five days the number of confirmed cases grows less than 4 percent per day, in which case the economy can be reopened. If the rate of increase is 4 percent to 7 percent, the light would be yellow, meaning the lockdown policy would remain unchanged. However, if the growth rate exceeds 7 percent, this would mean a red light, indicating that the lockdown must be tightened.
He said all activity in trade, commerce, services and manufacturing would be subject to restrictions such as disinfecting elevators in public buildings twice daily, regular temperature-taking and quarantining anyone over 65 or at special risk of infection.
Finance Ministry officials demanded that normal economic activity be resumed as much as possible, as well as a reopening of schools and a continuing of classes into the summer vacation to make up for lost days.
It seems that for now, however, the Health Ministry has won for the day concerning schools. Still, the treasury remains convinced that as long as the schools aren’t reopened, people with children won’t be able to easily return to work and the economic recovery will be slower.
The big mystery, say many who have been taking part in these meetings, is why Netanyahu so strongly supports the health care establishment in the debate. It’s all the more mysterious because the prime minister accepts the forecasts economic officials give him that so starkly show the cost of these policies.
One official who was asked about this said Netanyahu wasn’t making a political decision but was acting out of fear of making a critical mistake by letting economic activity resume prematurely.
“At the start of the crisis, I thought he was acting out of political considerations, but at a certain stage it became businesslike,” said the official, who asked not to be named. When did the change occur? After Benny Gantz agreed to break up Kahol Lavan and join a unity government with Netanyahu.
In any case, there seems to be a consensus that the economy can only return to normalcy gradually. Still, the fear remains that the Health Ministry will effectively stop any movement in that direction by raising objections at the last minute. “There has been a decision to resume economic activity, but the devil is in the details,” said another source who took part in the deliberations.
One reason pressure is growing to ease the lockdown is the relative ineffectiveness of the government’s business loan fund. An agreement with the banks on the fund was signed on April 1 and 40,000 applications were filed – but to date only about 1,000 have been approved. Most applications haven’t even been examined.
One reason for the slow progress is that the banks are only working at 25 percent to 30 percent of capacity and only 15 percent of branches are open. Also, this month was the month of the eight days of Passover. The banks say that in two or three weeks they should be able to close the gap between applications and acceptances.
Delays like these add to the pressure on the treasury to go for the simpler solution of reopening the economy rather than devising new rescue programs.
Pressure is also coming from the public, or to be more precise, from the self-employed, wage earners and companies in crisis. The prime minister may have finally reached a crossroad where he has to accept some risk. The idea that the world is looking at Israel as a coronavirus success story doesn’t hold water when 1.1 million Israelis are unemployed.