Analysis

Netanyahu Presiding Over Two Competing Plans for the Economy

Prime minister orders one from the treasury while telling MK Nir Barkat to produce his own

Hagai Amit
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Prime Minister Benjamin Netanyahu and then Jerusalem Mayor Nir Barkat speak during a news conference in Jerusalem, February 23, 2015
Hagai Amit

Until this week, it didn’t look like the tragic mismanagement of the economy in the face of the coronavirus could get any worse. But it did.

It started Monday morning when Finance Minister Yisrael Katz informed Prime Minister Benjamin Netanyahu that he and his team were preparing a long-term economic plan to cope with the effects of the second coronavirus wave and the looming lockdown. In the afternoon, at a cabinet meeting, Kahol Lavan ministers stood firm that in addition to sterner social distancing measures, there must be a plan for alleviating the economic damage of the crisis. At the end of the meeting, Netanyahu gave Katz 48 hours to prepare a “coronavirus package” that would help Israelis who would be the most hurt by the new measures.

Sovereignty Setback: Who Burst Bibi's Annexation Bubble?Credit: Haaretz

Treasury officials halted their work on the one-year state budget, which has been their focus over the last few weeks, and got to work on readying a program. But as Katz learned on Tuesday, Netanyahu had ordered Knesset member Nir Barkat to produce his own plan.

Barkat called an online news conference Tuesday, where he explained that Netanyahu had already met with him last Friday to ask him to draw up an economic program. “I presented the plan this morning to the prime minister’s staff. I would be glad to sit with the finance minister and the budget division, to put all the politics aside and discuss my ideas and those of others,” he said.

Finance Minister Yisrael Katz speaks at a press conference, Jerusalem, July 1, 2020
Finance Minister Yisrael Katz speaks at a press conference, Jerusalem, July 1, 2020Credit: Emil Salman

Netanyahu had promised Barkat the finance portfolio during the last election, but only after Election Day did he discover that it would be going to someone else.

Barkat’s program begins by declaring a crisis of economic confidence, which he attributes to the fact that policies have been dictated from above and change frequently. He said the treasury has to change. “Before you implement a work plan, you must ensure that the business sector likes it, like the plan I’m now presenting. I know the business sector like it and wants it to see it succeed,” Barkat declared. “There are people in the [Finance Ministry] budget division who want to save money and look at it as just an expense. But the money being spent is an investment.”

His plan includes measures to save 250,000 jobs through direct aid to businesses and the self-employed, totaling 28 billion shekels ($8.1 billion). The level of aid will depend on the size of the losses a business has suffered as well as sales turnover, with the smallest businesses proportionately receiving the most aid.

It also proposes encouraging consumer spending with a government investment of 10 billion shekels and government procurement of 40 billion shekels from domestic suppliers. The plan, moreover, calls for giving 100,000 workers professional retraining.

When asked how that spending would impact the country's budget deficit, Barkat said the cost of the program is equal to 4.5% of gross domestic product. “It will have a big impact, with a significant return. We shouldn’t be worried. We’re not talking about big spending relative to other countries in the world,” he said.

Even if it was Barak himself who took the initiative to formulate a competing economic plan, the fact remains that Netanyahu gave him the green light and gave Katz a vote of no confidence. He cast a second vote on Tuesday when he met with former Bank of Israel Governor Stanley Fischer, the current governor, Amir Yaron, and other top economic policymakers. Katz wasn’t there.

Former Bank of Israel Governor Stanley Fischer, Jerusalem, May 26, 2015
Former Bank of Israel Governor Stanley Fischer, Jerusalem, May 26, 2015Credit: Ofer Vaknin

As for the treasury’s 48-hour deadline, experience shows that any plan the treasury brings to Netanyahu will have to wait until he examines it and then puts his own imprint on it. The last time the treasury presented a 40 billion shekel program, it grew to 100 billion shekels within a few days.

Meanwhile, Netanyahu met with Kahol Lavan leader and alternate prime minister Benny Gantz on Tuesday to settle a dispute over whether the government will move forward with a two-year budget (as the coalition agreement calls for) or a one-year budget, as Netanyahu now wants. The outcome had not been revealed by press time.

The draft of the Economic Arrangements Law includes a one-year budget, and ministries controlled by Likud members have been readying one-year budgets while those of Kahol Lavan are drawing up two-year budgets. Perhaps that’s the solution: Half of the government will have one budget while the other half will have another one.

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