Finance Ministry Action Needed to Prevent Recession

The economic depression of 2001-2003 began with tourism. The tourists stopped coming to Israel when it became clear that it was dangerous here, that you could die in a terrorist attack while walking along Dizengoff Street in Tel Aviv or in downtown Jerusalem.

The suicide bombers managed to keep Israelis away from the shopping malls, and this was a serious blow to retailers and manufacturers. The result was a sharp drop in economic activity, the closure of factories and shops, employee dismissals, falling wages, rising unemployment and financial hardship in all sectors - including a large budget deficit.

Are we going to go through all this again? Are we looking at another depression? Thus far, there is a big difference between what happened then and what is happening now. Then, the war was fought in the large cities, with severe suicide bombings. This was the greatest blow, which led to the depression.

This time, it is different. The war is taking place on the borders - in Gaza, in Sderot, on the northern border, in Nahariya, in Safed and even in Haifa - but it has not yet reached the soft economic underbelly of the center of the country.

It is true that internal tourism in the north has already taken a hit, and that tourism from abroad will drop. It is also true that Israel's risk level has risen, and that therefore investments will drop. It is a fact that the stock market reacted with a sharp fall and the dollar rose.

But all this is totally unlike terrorist attacks in major cities in the center of the country. As long as we can prevent that, including the firing of missiles, the economic harm will be tolerable, and we will not slide into a depression like that of 2001-2003.

And what should the Finance Ministry do in this situation? It can limit the damage, but unfortunately, with no connection to the recent security events, the treasury is currently at a low.

At every meeting, budget division officials provoke anger and opposition. Even contempt. Knesset members, ministers and directors general tell them to wake up, the diskette has been changed. Benjamin Netanyahu is no longer at the treasury. Expenditure will rise, welfare payments will rise, privatization is no longer a holy word and competition is not always right.

The situation inside the treasury has changed, too. Netanyahu used to listen to the budget division officials, and not only did he encourage them to carry out reforms, he would actually suggest far-reaching improvements.

But Abraham Hirchson is completely different. He listens to the budget division officials, but hardly reacts. Everything gets a pleasant nod. "It'll be okay," he says.

It seems that he lacks the motivation to carry out big revolutions. He does not push the treasury officials forward and does not add his own ideas.

He also does not fight with other ministers, even though this is his job. There is only one subject that arouses his enthusiasm: the open skies policy.

It seems that Hirchson would rather get through his tenure at the ministry in peace. Without many revolutions, without big reforms, without wars with MKs and other ministers over streamlining and changes.

However, to compensate for the damage caused by the flare-ups in the south and the north, the economy needs to be pushed forward with constant reforms, efficiency measures and structural changes in the public sector. If the big reforms stop, the growth engines will stop working, and the economy will slowly sink - quietly, without arguments or headlines, but at a very big cost in terms of slowing growth and rising unemployment.