The Bottom Line / Abandoned on the Battlefield

During this rough period of war and terror attacks, a deteriorating economic situation, an endangered budget, firings rising and investments falling, the employers have signed a cost-of-living agreement with the Histadrut labor federation that is somewhat at odds with the serious state of the nation.

Who's to blame for capitulating to the Histadrut? Who provided incorrect data? Who gave in? And who played politics?

Oded Tyrah, the chairman of the Coordinating Bureau of Economic Organizations, feels like a soldier abandoned in the battlefield. He feels like a soldier who was sent to the front by politicians who not only did not help him, but actually sabotaged him.

It began Saturday night, October 19, when Prime Minister Ariel Sharon chose to bypass his finance minister, Silvan Shalom, and summon Histadrut chairman MK Amir Peretz for a chat - an invitation that has cost us dearly.

At the time, the finance minister put on a brave front: "It is impossible to pay any cost-of-living increase whatsoever at present," he said then. Hence, you can imagine Tyrah's great surprise on hearing on the radio, on his way to a meeting with Peretz on October 23, the finance minister saying: "A cost-of-living increase must be paid."

Perhaps Shalom was struck with election panic, or perhaps he did not want to remain the "evil purser" against Sharon, "the kindly grandfather." Shalom changed his tune also because of the relatively-high September consumer price index, and also because he had received "incomplete" figures on the cost of the cost-of-living deal from senior treasury officials.

But when the senior treasury officials became aware of the true cost of the deal, they woke up and went out to the press with harsh criticism. Finance Ministry Director-General Ohad Marani informed Tyrah that the deal was unacceptable to the treasury, while Shalom informed Peretz that he would not accept the deal if the July 2003 payment wasn't postponed.

The negotiations were, therefore, renewed and the July 2003 payment was delayed to January 2004. In return, the January 2003 payment was brought forward to December 2002.

As a result of these changes, the treasury "earned" NIS 300 million, such that the cost of the deal for the 2003 budget stands at NIS 700 million. But the state coffers are lacking this sum too, so a "hole" of NIS 350 million has been created in next year's budget. This is even before the conclusion of the talks with the local authority and public sector employees.

It's worth noting that postponing half the payments to 2004 has led to a saving of some NIS 2 billion for the business sector in 2003, as well as a saving of NIS 1.4 billion (gross) for the state budget. But weak factories and businesses that are barely surviving now and will be forced to pay the cost-of-living increase, will also be forced to cut back on operations and fire employees.

Given all of the above, we are in fact concerned with a deal that does not sufficiently take account of the state of the economy. A better agreement should have given a full cost-of-living increase only to low-wage earners, with individuals earning higher salaries forced to absorb the erosion.

In such a manner, deficits and dismissals could be avoided, while the gap between the stronger and weaker sectors of society would be closed a fraction.