Yair Lapid's Moment of Truth Will Come After the Gaza Operation

Will the finance minister be able to withstand pressure to compensate the army, the cities and the businesses that suffer from the Gaza barrages?

Nehemia Shtrasler
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Israeli Finance Minister Yair Lapid, right, inspects damage in Sderot after it was hit by rocket fired by Palestinian militants in Gaza, July 3, 2014.Credit: AP
Nehemia Shtrasler

Why is the cost of spending a night in an Israeli hotel so high? Why does a weekend in a bed-and-breakfast in the Galilee cost twice as much as in Europe? Because hoteliers in Europe don’t have Operation Protective Edge, or Operation Defensive Pillar, or Operation Cast Lead, or the Second Lebanon War.

On an average of once every three years, tourism in Israel is hit by a major security event (not including the smaller ones in the interim), which provokes a cancellation of reservations, many vacancies, and a loss of all the money invested in marketing and advertisement abroad. Now, for example, there are cancellations of reservations not only for July-August, but up to the end of the year – until Christmas.

Who wants to be hit by a rocket on vacation?

Hotel managers and owners of B&Bs have to take into account all this uncertainty, all these losses, when they set their prices. And this makes things more expensive. It’s also one of the reasons why we’ll never be able to enjoy a European standard of living. At least as long as our leaders, Prime Minister Benjamin Netanyahu, Economy Minister Naftali Bennett and Foreign Minister Avigdor Lieberman break out in hives when they hear the word “peace.”

To the people in Israel's tourism industry who are suffering, we must add the merchants who are left with empty stores, the abandoned shopping malls in the southern part of the country, the industrialists who are forced to operate in low gear, the owners of wedding halls and the farmers who can’t go out to the fields. They are all already paying the cost of the military operation now, and the compensation they will receive will not cover the entire burden they are carrying.

That’s the situation in the private sector. But what is happening at the macro level? To the state budget? To economic growth?

If you were to enter the Finance Ministry in Jerusalem these days, you’d discover a strange quiet in the corridors. The employees of the budget division are sitting silently in their rooms and keeping mum. They have gone underground; they are flying below the radar until the operation is over. They are well aware that now they are not allowed to initiate any discussion, any debate, any discourse. Now is the time when the politicians are competing among themselves as to who will offer greater compensation to the south, the north, the center and anything that moves.

Already this week the government decided to give 417 million shekels ($121.7 million) to "strengthen" the communities near the Gaza Strip and Sderot. This is not compensation for damages incurred. These include breaks in income tax, property tax, leasing, day-care center expenses, etc., as well as funds for additional foreign workers for agriculture. What’s the connection? There is none.

The mayor of Ashkelon thinks that this is a scandal, because Ashkelon deserves the same assistance. It is also suffering. It should also receive what the communities near Gaza are getting. When he was asked: And what about Ashdod? He replied, without missing a beat: Ashdod deserves it, too.

If so, I ask: And what about compensation to Bat Yam, Holon and Tel Aviv? Everyone should get something. But who will pay? Nobody. That’s the new economics. The economics of ex nihilo.

A moment before the start of this operation the finance minister was sure that 2014 would end quite well. He also planned to present to the government the principles underlying the 2015 budget, with a deficit of 2.9 percent of gross domestic product and cuts of 6-7 billion shekels.

But then came Operation Protective Edge and changed everything. Growth will be low, as will revenue from taxes. In addition, expenditures will increase and the army won’t miss the opportunity to demand a huge addition of 8-10 billion shekels to renew its inventory and pay reservists, as well as a little more for some “strengthening,” a mere 2-3 billion shekels.

This is precisely moment of truth for Finance Minister Yair Lapid. He can open the coffers and be “nice.” That will end with a serious crisis and a personal failure. He can also demonstrate leadership, be as strong as a lion, and counter all the demands: whether of the Israel Defense Forces, the local authorities, industry, agriculture, the Histadrut labor federation, and even the mayor of Ashkelon. After all, we all say that we have “a strong and united people of Israel.” So why shouldn’t we also have a “rock solid” (the Hebrew name of Operation Protective Edge is "Operation Solid Rock") finance minister?

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