The Bottom Line / Save Israel From Disaster

Our economy is in a more dire situation than the treasury's spokespersons will concede.

Our economy is in a more dire situation than the treasury's spokespersons will concede. They talk of a NIS 1.5 billion hole in the budget as a result of the bills that afford tax breaks to Negev residents and provide increased allowances to families with five children or more as well as the decision not to cut the allowances for children over the age of 16. But the gaping hole is much bigger than that.

Firstly, growth this year will be less than 2 percent, which means that tax revenues will be NIS 2-3 billion less than planned. Secondly, Shas has not finished its extorsions yet. And thirdly, the budget for persons with disabilities will be expanded by several millions starting this year.

With such a budget hole of NIS 5 billion, the budget deficit will not be 3 percent as planned, but an ominous 4 percent. Once global credit rating companies realize what's going on, they will reduce Israel's credit rating and send long-term interest skyrocketing. The government's plan to sell NIS 20 billion worth of bonds in 2002 will also send interest climbing.

This combination will deal a death blow to investment, growth and employment, and might even create a financial crisis like the ones we have seen in Argentina in 2002, Russia in 1999 or Thailand in 1997.

Against this dangerous backdrop, several people tried to use backstage influence to convince Prime Minister Ariel Sharon and Labor leader Benjamin Ben-Eliezer that it is time to put parliamentary consideration aside and save Israel from disaster.

Former finance minister, Avraham Shochat, was the first to propose an amnesty. At a Labor meeting on Monday he said that all private-member bills and tax breaks given to residents of the Territories must be revoked, and that the government's original slashed budget must be re-adopted.

Concurrently, businessman Moshe Kornik organized a meeting with Ben-Eliezer on Tuesday. Kornik, together with other leaders of Israel's economy, such as Dov Lautman, Uri Dori and Zvi Yemini, explained the severity of the situation. Economics professor Haim Ben-Shachar and former governor of the Bank of Israel, Jacob Frankel, implored Sharon to go back to the principles he had pledged in his address to the nation on December 23, when he said he had no money to spare.

On Tuesday Ben-Eliezer offered Sharon to revoke all private-member bills and get back on saner tracks. But Sharon's office quickly announced this was just a PR maneuver.

The truth is that Sharon is ready to pay Shas and United Torah Judaism, which insist on the large-families bill, any price in order to keep his seat. This is a costly and irresponsible survival exercise at the expense of Israel's social and economic interests. Sharon finds it much easier to order a batallion or two to move on Tul Karm and get brownie points in the front against Yasser Arafat than to stick to his guns when economic principles are at stake.

What Sharon does not understand is that unless he makes the necessary move today, it will not take more than a few months before the economy is thrown into a very deep crisis with extremely high rates of unemployment. Sharon will then be the target of criticism - from the public at large, and especially from his loyal allies, Eli Yishai and Shlomo Benizri.