Lapid's Financial Gamble

The popularity of Yesh Atid's leader is liable to plunge if he takes the treasury portfolio, but with some proper planning he can bring his new brand of politics to Israel's economy.

Speculation mounted over the weekend that Yesh Atid party leader Yair Lapid has decided to take on the role of finance minister in the new government, overcoming serious misgivings on his part. Lapid preferred the Foreign Ministry but was blocked by Prime Minister Benjamin Netanyahu, who had promised the job to Avigdor Lieberman.

Even when it became clear that the Foreign Ministry was out of his reach, Lapid was extremely hesitant to take on the treasury post. He had all the reasons in the world to reject it: lack of experience and knowledge, talents more attuned to the Foreign Ministry than the treasury, knowing that right at the outset he'd need to deal with budget cuts and economic measures, and the obvious fear that the job is nothing but a trap laid out by Netantyahu to deflate his surging popularity.

Only one factor weighed in on the other side: Lapid's election promise to kick off his political career by taking care of the middle class and demanding to answer his campaign slogan, "Where's the money?" Lapid pledged a new brand of politics, and he'd be hard pressed to explain to voters why he preferred abandoning the treasury – the most economically and socially influential cabinet post save for that of the prime minister – to another party. His inner circle, which includes businessmen, apparently convinced him there's nothing to fear about the treasury. But is this really so?

If Lapid takes the treasury, by April 1 he'll already get a small taste of what awaits him: a 10 percent hike in electricity rates – for the middle class, too. The move will obviously spark consumer outrage and consternation as to what additional measures the public will need to endure in the near future. This will be the first taste of the struggle facing Lapid throughout his term: An inability to keep his promise of looking out for the interests of the middle class.

This will repeat itself over and over, even more acutely, in the coming year. The need to increase taxes and reduce the budget by NIS 15 billion by cutting public services will pit him against his promises. He'll quickly find himself in a dilemma deciding who will bear the consequences: the ultra-Orthodox or the poor; the middle class or the upper crust – many of whom gave him their vote.

Lapid is far from being an ideal candidate for finance minister and he knows it. That's why he was hesitant. The likelihood for it turning out to be political suicide is greater than the possibility that his appointment will usher in a wind of political change. He deserves credit for being willing to take the risk.

The main worry isn't necessarily his lack of experience. We've already seen finance ministers without experience or a grasp of economics who managed to learn quickly on the job and fill the role reasonably well. The big question is his ability to make tough decisions, including some in complete defiance of his election platform, and become the government's and Knesset's bogeyman.

The new government is starting out with Lapid as the country's most popular personality, but the crown's luster will wear off in a flash during a year of tough economic measures. This doesn't mean he should be deterred. The right way to approach the job is by building a long-range plan, centered on preparing a fiscally responsible budget, fostering economic expansion, dealing with focal points of poverty, inequality, and high cost of living, and instituting economic reforms.

The first year will be tough and full of potholes, and it may see Lapid's popularity taking a plunge. However, he can recover by assembling an expert team that presents, alongside the budget, clear objectives for the remainder of the term. Lapid is believed to have already chosen a director general for the treasury, Hillel Kobrinsky, who helped him establish Yesh Atid and is largely responsible for the new party's exemplary organization and electoral achievement.

Kobrinsky is experienced as a successful high-tech entrepreneur but isn't skilled in macroeconomic policy management. This ensures a particularly challenging baptism of fire this year for him and Lapid – as well as the Israeli economy. If they get through it safely, perhaps we can then start dreaming about the new brand of politics managing Israel's macroeconomic affairs.

Olivier Fitoussi
Ofer Vaknin