Early Elections Likely to Cost the Economy NIS 2 Billion

Elections will lead to a delay in passing the 2009 budget and its accompanying reforms, which will cost the Israeli economy dearly.

Early elections will exact a heavy price on the Israeli economy. Not only will we have to pay for the elections: campaigning, electoral expenses and lost work time; but the elections will lead to a delay in passing the 2009 budget and its accompanying reforms, which will cost the Israeli economy dearly. All this comes in addition to any extra spending that will have to be promised to form a new government.

The cost of the elections themselves is estimated at NIS 2 billion, about NIS 1.5 billion for lost work time and productivity due to the Election Day vacation day, as well as direct costs: NIS 250 million for running the elections and another NIS 180-220 million for campaign finance for the parties, based on elections to be held in February 2009, with February 17 as the most likely date.

Another problem is the parties: Almost all are in serious debt and cannot afford the election campaigning. They will be forced to raise donations.

As for the Knesset, as it will be working only 85 days this year (see box), and it will not be able to pass any of the planned reforms for next year. The budget will not pass, and the state will be forced to continue next year with monthly spending based on the 2008 budget divided by 12, plus an adjustment for inflation in 2008. The budget will most likely not be passed before April 2009, if not May. This means necessary changes will not be implemented.

Among the reforms the treasury has planned for 2009 are privatization of more bus lines, opening up the electricity sector to competition, and changes in tax breaks for the periphery.

Other planned changes, which will be unlikely to pass in a pre-election period, are higher tuition for certain university faculties, such as law and business.

Parties deep in debt

Many expect the NIS 2 billion estimate for election costs to grow. As of now, each party will receive NIS 1.219 million per MK. But this is not based on the actual number of 120 MKs. Instead, each party receives this amount based on an average of the number of its MKs in the present Knesset and the new one. This was meant to make it easier on parties, which lost seats. This means the number of virtual MKs who receive NIS 1.219 million each will be much higher than the actual 120 MKs.

The parties will also have to rely on their regular party financing, NIS 61,000 per MK per month, as most of them are seriously in debt.

As of December 31, 2007, the state comptroller estimated the parties' debts as the following: Labor, NIS 128 million; Likud, NIS 34 million; National Religious Party, NIS 21 million; and Kadima, NIS 3 million. The Pensioners Party had a surplus of NIS 6.6 million.

Party leaders and MKs will now have to start making the rounds, mostly visiting wealthy business people, on the hunt for donations.

Such a situation is not actually new, as it is very similar to the last election period in 2006. Then, too, the budget was not passed until June 2006 after late February elections. More worrying, especially in light of this year's world economic crisis, is the need for important decisions to be taken and not delayed.