The European Sting

It would be nice to get into the prestigious OECD, but it isn't worth stripping bare for the privilege.

For years we've been on the threshold, waiting for the dream to come true - joining the prestigious Organization for Economic Cooperation and Development, the exclusive club of the world's 30 most developed countries. As early as 2000, then finance minister Avraham Shochat said we were "very close" to admission. Nine years later, once again we are "very close" to making it.

There is one little obstacle to overcome: Adoption of a long list of economic recommendations from the OECD delegation that visited Israel recently. Even if we accept and implement all of the recommendations, our entrance ticket is not guaranteed. Behind the economics lie the politics, and as long as the Europeans perceive Israel as balking at peace, the OECD's Council of Ministers will not let us in. There's no such thing as "politics is one thing and economics another." Everything is intertwined, and interests are all.

One of the OECD recommendations was for the Bank of Israel to desist from intervening in the exchange rate "to avoid damaging its credibility" and also because such intervention creates inflationary pressures. Sounds innocent and professional, but there's an interest: The involvement of the central bank's governor in manipulating the exchange rate prevents revaluation of the shekel, giving Israeli exporters an advantage over those from OECD countries, something that upset the delegation.

Another recommendation that concealed an interest was that Israel should stop the process of reducing income tax and company taxes. The OECD members do not want Israel to become too competitive and attractive; low taxes entice foreign investors and serve as high-grade fuel for growth. Evidently no one wants to be faced by too strong a competitor.

The delegation also proposed a hike in VAT, noting the OECD countries where it is as high as 20 percent, whereas in Israel it is "only" 16.5 percent. But this arouses the suspicion that it is actually envious of our lower VAT and wants Israel to make the same mistake it made.

As for the national budget, the OECD delegates criticized the fact that Israel's maximum national budget increase is only 1.7 percent. The Israeli economy is growing at a faster rate than 1.7 percent, they said, and therefore the weight of public expenditure in the GNP will decline. But what's wrong with that? Would a groom complain that his bride's too pretty? Israel does want to reduce the weight of public expenditure in its GNP, and that is also what will make tax cuts, rapid growth and reducing unemployment possible. Don't let them tell us that we'll also get less education, health and welfare, because the public sector still has plenty of fat that can be trimmed, a lot of room for efficiency, savings and reforms without harming services for the citizens.

Once before, the OECD tried to get Israel to prolong the protection period for patented drugs. The implication was sacrificing Teva on the OECD altar, as most of its business is in generic drugs. The delegation also shamelessly recommended we reduce subsidies to agriculture and allow free-market rules to prevail, even though in Western Europe, they heavily subsidize their farmers.

The Knesset Finance Committee last week discussed the subject, and MKs used the OECD delegation's criticism to lash out at Israel's economic policies. Finance Minister Yuval Steinitz retorted that the delegation's report "was not the Torah of Sinai. They recommend, but we are not obliged to accept."

Steinitz is right. The OECD report was not the work of ministering angels. It is replete with the self-interests of a European agenda, which simply does not suit us. True, it would be nice to get into the prestigious club , but it isn't worth stripping bare for the privilege. There's no need to worry about getting our duds ready for the welcoming ceremony, because the politics prevailing in the organization will once again postpone Israel's admission, just as in Shochat's day.