Treasury Putting Together Package to Deal With Economic Slowdown

Bar-On: Steps include actions to spur growth, investment in infrastructure, increasing available credit.

The treasury is putting together a package of proposals to deal with a possible economic slowdown. The steps include actions to spur growth, investment in infrastructure, increasing available credit, speeding up structural changes in the economy and removing bureaucratic barriers, said Finance Minister Roni Bar-On on Thursday.

Bar-On called a round-table discussion Thursday in Tel Aviv with business leaders and senior government officials. The meeting was devoted to discussing possible actions by the state's in the coming few months to handle the expected slowdown in both the global and Israeli economies.

Bar-On said the treasury's goal is to "act cautiously, moderately, with relevant and responsible actions that will make it easier for the economy to deal with the challenges facing it, and will speed up processes that encourage growth." He said the way the Israeli economy has so far handled the financial developments proves it is strong and mature.

Attending the meeting were the chairman of the Histadrut labor federation, Ofer Eini, and senior officials from the treasury and the Bank of Israel. The heads of most business sectors also attended, including the president of the chambers of Commerce, Uriel Lynn, and the head of the Manufacturers Association, Shraga Brosh, as well as leading academics.

Eini said the Histadrut would be willing to discuss anything as part of an overall agreement, but reminded everyone that the union would likely demand a cost-of-living increase for workers due to high inflation. He also hinted he would be willing to participate in a package deal between the state, labor and employers, if it included guarantees for pension savings and no firings.

Bar-On also said he "did not rule out state intervention, as that is part of my responsibility as finance minister." He said he would not hesitate to act, but he would only do so in cases where there was a proven market failure, which required a focused and effective government initiative. Bar-On once again repeated his stance on the 2009 budget, saying it was important to keep to budgetary principles.

Prof. Manuel Trachtenberg, the head of the National Economic Council in the Prime Minister's Office, said it was important to avoid making the labor market more rigid, and to allow workers to move between sectors.

Brosh proposed accelerating investments in infrastructure projects and setting up a joint fund of the state and banks to provide credit for small and medium-sized exporters.

Lynn proposed that the state provide NIS 5 billion in loan guarantees via the banks and provident funds to be used to provide credit to firms and institutions. He said the loans would only be provided to healthy companies that have a good chance of surviving, and according to set criteria supervised by the Bank of Israel.