Shock and Awe: Israel's Treasury Is Under New Leadership

Nehemia Shtrasler
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Avigdor Lieberman at the Knesset two weeks ago.
Nehemia Shtrasler

Histadrut labor federation chairman Arnon Bar-David noticed an immediate change. After the head of Israel’s main trade union federation returned from a meeting in the Finance Ministry a few days ago, he told a friend: “There’s an enormous change at the treasury - smiles have returned to people’s faces.” Indeed, the cloud of fear under which the ministry’s economists labored for over a year under Herod’s rule (also known as Yisrael Katz, who has compared himself to the biblical king) has been replaced by the positive atmosphere under Avigdor Lieberman. Treasury officials report that the new minister has a good grasp of the material and has done his homework, and that they enjoy going to the office in the morning.

It wasn’t only the atmosphere that changed, however, it was the entire economic approach. Lieberman is showing himself to be an old-school finance minister, the kind who believes in the traditional laws of economics and hasn’t succumbed to the temptations of neopopulism. He has announced that he will pursue a responsible budget policy and present a plan to reduce the deficit. “I’m not Santa Claus, handing out presents,” he said, alluding to his recent predecessors in the position including Yair Lapid, Moshe Kahlon and Herod, none of whom were ever particularly interested in curbing the budget deficit.

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Another important change is that the Economic Arrangements Bill – the supplementary legislation accompanying the state budget – will be particularly large and include reforms in every area of life in Israel.

It’s interesting to observe that even the economists in the Finance Ministry’s budget division have not yet fully absorbed the transformation at the treasury. They are accustomed to proposing reforms to the finance minister and getting bashed for an “extreme” suggestion that is “politically unfeasible” and from which “problematic components must be removed.”

Lieberman reacts differently. To the astonishment of the economists, when they tell him, with great trepidation, that their proposal will likely encounter resistance,  Lieberman's response has been, “So what if there’s resistance, I do what’s right for the economy, not what will serve somebody’s voter base.” 

Lieberman intends to be a strong finance minister who doesn’t yield to pressure. He recognizes that it’s exactly what Israelis want: a finance minister who guards the government’s purse strings, reduces the deficit and prevents economic crisis. Because Lieberman also knows that the public appreciates reforms that lead to growth and jobs, there will be many reforms. That is, we can expect to see a “bad” finance minister who is in fact a good finance minister.

He chose to address a number of critical topics, such as transportation. Everyone knows traffic congestion in Greater Tel Aviv is growing worse and that millions of work hours are being lost. The finance minister is encouraging the construction of a (partly above-ground) subway system for the metropolitan area and the creation of a metropolitan transit authority that will further develop the area’s public transportation, in cooperation with Tel Aviv and its satellite cities. It’s a decade-old plan that Herod torpedoed when he was transportation minister.

Another major goal is curbing the rise in apartment prices. The treasury intends to sharply increase beginning construction of housing units, to 75,000 a year, in part by selling much more land zoned for residential construction.

Everyone also recognizes that the situation in which women can retire at age 62 and collect a pension and old-age benefits for an additional 25 years on average cannot continue. The draft arrangements law calls for raising the retirement eligibility age for woman to 65 (men can retire at 67).

Some say there is no chance of passing all these reforms, when the coalition consists of eight different parties with conflicting interests. But the opposite is the case. Each component of the coalition knows its majority is very slim and that if it votes against the measures, the entire structure will collapse. So everyone will compromise and the budget will pass on November 4, at night, at the last minute.

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