Under Pressure

Likud worried gas price hike will incite further protests, as pressure on government mounts.

The people who are benefiting most from the panic that has taken hold of the government are drivers: The price of gas was to have gone up today by 20 to 30 agorot per liter, but the pressure on Prime Minister Benjamin Netanyahu had him spending all day Saturday trying to figure out how to avoid the price hike.

Likud is afraid that if fuel prices were to go up Sunday, a wave of protests would follow, which they really want to avoid.

Steinitz Netanyahu - Tess Scheflan - 08072011
Tess Scheflan

Fuel prices are rising worldwide and, by law, the government has to set the price according to the price of oil at Port de Lavera, France, so prices will not be subject to political considerations.

Netanyahu's only option would be to approve the price hike and lower the excise tax by the same amount. Because of the legal ramifications, the prime minister consulted over the weekend with the experts.

Another obstacle is Finance Minister Yuval Steinitz. He opposes reducing taxes on fuel because of concerns over a decline in indirect taxes and an increased deficit. Instead of reducing taxes, he wants the government to see to it that the sales margins of the fuel companies are reduced, lowering the price in that way.

Netanyahu has asked National Infrastructure Minister Uzi Landau to work on the matter. But sources in Likud say that Landau is in no hurry to do so because the pressure is not on his party, Yisrael Beiteinu.

Another group that stands to profit from pressure on the government is the doctors, because the Prime Minister's Office wants to remove that big group from the circle of public protest as soon as possible. That will mean major additional increments to doctors' salaries and more stress on the budget. Netanyahu is very worried about the spread of protest this week to other areas, the common denominator being the great burden on the middle class; more precisely, that part of the middle class that is neither ultra-Orthodox, settler nor works for one of the major monopolies.

The Knesset will be in recess from the end of the week until October, so Netanyahu can take comfort from the knowledge that it will not vote the government down soon. But he knows the protests will persist, and so he intends to act in two realms.

He will establish a committee of officials from various ministries to examine indirect taxes, which have grown in recent years to 49 percent of all taxes collected. These include VAT, various customs duties and excise tax on fuel.

Netanyahu will also address monopolies. In closed discussions, Netanyahu has said that public protest has created the opportunity for him to deal with the economy's chronic ills. In other words, to bring competition to areas of the market controlled by monopolies, which lead to high prices.