Dinur: Economy Is in Fine Shape

Raanan Dinur, the director general of the prime minister's office, seems unfazed by the crises shaking world markets.

Raanan Dinur, the director general of the prime minister's office, seems unfazed by the crises shaking world markets. The best thing Israel can do is keep a close eye on the situation, but not to worry, explains Dinur, who's running the shop as if the accusations hounding Prime Minister Ehud Olmert and former finance minister Abraham Hirchson didn't exist. He believes in their innocence until proven otherwise.

They say prophecy is for fools, a tenet that Dinur evidently appreciates. "If the Israeli economy slips into crisis, then we'll talk about crisis. Many say that what is threatening the Israeli economy [most] is the political situation. I disagree," says Dinur. "Anarchy would be a threat, but that isn't the situation."

The government should keep an eye on the markets in the U.S., Europe and the East, noting dangers and opportunities as well, Dinur says. Meanwhile, here at home, Israel presented brisk first-quarter growth of about 5.4%, in annualized terms. "I believe the second-quarter results won't be quite as good, but they won't be especially problematic," Dinur says, risking a prediction. "I don't see signs of weakness in the economy, and it is important for the government to behave with restraint."

That doesn't mean signs don't exist. The Danel manpower company reported a 20% drop in demand for workers in June, as companies hunker down in anticipation of recession. One exception was the hotels sector, where Danel reported a 20% increase in demand for staff.

But meanwhile, indeed, recession isn't here, though Dinur concedes that the economic problems in America could have ripples for Israel. He professes to understand the significance of the shekel's appreciation against the dollar, which has been badly hurting exporters. But Israel's industries are well-managed, Dinur stresses: They can adapt to changes.

Exporters dismayed by their shrinking or disappearing profits have been calling on the Bank of Israel to intervene in the forex market like in the days of yore, such as by slapping a 35% tax on capital gains from foreign currency. Dinur thinks that's a terrible idea.

"The fact that we face dangers such as appreciation and the [troubled] global economy shouldn't drive the governor [of the Bank of Israel], the finance minister or the prime minister to use tools that we were glad to get rid of in the 1980s," the director general says. Certainly for the time being, he drives home his point - "We are highly encouraged by [Israel's] economic results."

Is the government preparing for a wave of layoffs as hurting companies scurry to cut costs? The government doesn't manage private-sector manpower, Dinur says, deflecting the issue. "Its job is to create tools for the business sector when the times change."

And just how is the economy affected by the political situation? "The budget discussions weren't delayed by so much as a second by any political constellation," Dinur insists. "The budget [for 2009] is highly problematic, because we have very little flexibility compared with the 2008 budget, because of long-term programs for security and education." That said, Dinur added that he believes the Finance Ministry can push it through the various approval processes by mid-August.

If the political situation is casting a shadow over economic issues, it's mainly sensitive areas such as child allowances, Dinur explains. These are issues that do not brook change before the elections: Even if the prime minister were to smile upon increasing allowances, complaints would be made about his motives.

Apropos motives, open relations between business personalities and the political echelon don't worry him. What does worry him is dealings behind closed doors, but: "From my viewpoint here at the prime minister's office, nothing is being done behind closed doors," Dinur spells it out. He categorically denies media reports that he intended to build an "alternative budget" to the one being constructed by Finance Minister Roni Bar-On, though he doesn't deny having had easier working relations with the former finance minister, Abraham Hirchson, who's suspected of embezzling from the National Workers Organization when he served as its chairman, among other things. But it isn't a question of overlapping turfs: The prime minister's office's domain includes public relations, which isn't the treasury's domain, Dinur explains.

With reporting by Haim Bior.