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Treasury Official's Resignation Letter Could End Up Costing Israel Billions

Credit rating agencies are going to be looking closely at treasury budget chief Shaul Meridor’s accusations, and a rating downgrade may well follow - which could spoil the prime minister's celebration

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The sharply worded resignation letter the treasury’s budget director, Shaul Meridor, sent to his boss – Finance Minister Yisrael Katz – should leave no doubt in people’s minds as to the slippery slope Israel’s economy is on.

All the reports we’ve been hearing about staff work being ignored, decisions being made with only the shortest-term considerations in mind and constant changes to the state budget, are now confirmed publicly from someone on the inside.

Meridor has been in Prime Minister Benjamin Netanyahu’s crosshairs since the start of the coronavirus crisis. The prime minister wants officials to do what they’re told, no questions asked and with no expert input. That’s how Netanyahu works with the officials close to him, such as National Economic Council Chairman Avi Simhon and National Security Council chief Meir Ben-Shabbat.

Outgoing Treasury Budget Director Shaul Meridor at a conference in November 2019.Credit: Meged Gozani

Katz has become Netanyahu’s faithful servant, joining the boss in his attacks on government officials. Even Katz’s trusted director general, Keren Terner-Eyal, whom he brought with him from the Transportation Ministry, has been the target of personal attacks no less than Meridor and treasury legal adviser Asi Messing.

Even more disturbing than Meridor’s resignation are the reasons stated in his letter: “You do not enable me or the other public servants in the various divisions of the Finance Ministry and other ministries to do what we know how to do – to formulate, propose, analyze and critique policy measures.”

He added: “Policy is characterized by narrow, irrelevant and short-term decision-making while professional staff are silenced, blatant disregard is shown toward staff work, policies are rash, and normal budgetary tools and norms are ignored.”

By now, the letter’s contents have reached the desks of the international credit rating agency analysts. Taken together with the recent resignation of Finance Ministry Accountant General Rony Hizkiyahu (which will go into effect no later than October), there’s plenty of food for thought concerning Israel’s credit rating.

As a rule, the agencies don’t care who’s coming and going from key jobs at the treasury. But when someone leaves with departing words like these, that’s another story. Meridor’s letter sounded like an indictment of the government’s economic policies. It can’t be ignored.

It means that Meridor’s letter isn’t just a personal or even political matter, but a major economic event that may lead to Israel’s credit rating being downgraded and the cost of government borrowing rising as a result. As it is, the government is showing little ability to get to grips with either the health or the economic sides of the coronavirus crisis. A lower credit rating will compound our woes.

For Netanyahu, Meridor’s resignation isn’t a major achievement. The budget chief hasn’t been the biggest thorn in the prime minister’s side – that honor belongs to Attorney General Avichai Mendelblit, who has yet to tender his resignation.

For the rest of us, though, Meridor’s departure is extremely significant. It constitutes a red light concerning the management of economic policy, as well as the status of appointed officials in the Netanyahu era – especially the ones who find themselves under fire from the prime minister’s Balfour Street residence.

In Meridor’s case, the endless barrage of contempt, insult, innuendo and double-dealing had the desired effect. We can only hope that it won’t succeed with Mendelblit.

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