Chill the Euphoria, the Crisis Isn't Over, Warns Finance Minister

Israelis, be not euphoric about the state of the economy, was the message Finance Minister Yuval Steinitz delivered at the annual Caesarea Economic Forum in Eilat yesterday.

His message: Israelis are evincing more optimism than the facts on the ground warrant. But on the other hand, borrowing a phrase from Friedrich Nietzsche: "That which does not kill us makes us stronger," the minister told the audience.

"The present euphoria is dangerous, and premature," Steinitz said in the keynote address. "Hard times still lie ahead. But I have no doubt that if we make the right moves, in two or three years we can lead Israel to a strong, healthy, competitive economy relative to the world."

The crisis is still here, Steinitz spelled out. "There are positive indicators, but they are too few, and only appeared in the last month or two. They do not yet portend economic recovery."

The remarkable rebound of Israeli stocks is indicative of nothing, Steinitz continued.

Switching to a positive note, the minister noted that after the high-tech crash of 2001 to 2003, Israel's economy rebounded powerfully. Also, the current crisis didn't impact Israel's banks or insurance companies as happened abroad, he said.

It is true that the global economic crisis hit Israeli exports hard, Steinitz noted. Exports plunged by 25% in recent months (in annualized terms) compared with the same period of 2008, and that matters because exports constitute 45% of Israel's gross domestic product. Also, tax revenues seem likely to be NIS 70 billion below target in the two years 2009 and 2010, Steinitz said.

Next week the Knesset will be voting on the budget proposal for 2009 and 2010, about which Steinitz had scathing things to say regarding his colleagues in the cabinet and parliament. They are complacent, he said. "They are ignoring the hard realities and behaving as though all was as usual. Ministers and Knesset members are trying to rack up the same achievements as in the past, sectoral achievements, sometimes personal ones, although the obvious agenda of the government and Knesset must be economics and then economics, preserving jobs, protecting businesses, and then again, economics and then economics."

"Everything matters," Steinitz said, "health, education, welfare and immigration absorption. But right now the priority should be economics. The threat is real and if we aren't careful, we'll be hurt."