"I am not going to waste my time with you talking facts."
You should rephrase that to say "I am not going to begin to discuss the facts with you."
Israel's Efforts to Reverse an Economic Slide Draw Praise and Protests
nytimes.com
July 20, 2003
By GREG MYRE
JERUSALEM, July 19 — Benjamin Netanyahu is racing to revolutionize Israel's economy, and he considers it a sprint, not a marathon.
In just over four months as Israel's finance minister, Mr. Netanyahu has cut the top income tax rate to 49 percent from 60 percent, winning cheers from the wealthy. He is making sweeping reductions in social programs, provoking protests from the poor. He is trying to raise the retirement age to 67 for all, from the current age of 60 for women and 65 for men, prompting demonstrations by older workers, and he has revamped the pension system, drawing praise from economists.
The national airline, El Al, is being privatized, and Mr. Netanyahu plans to reduce greatly the state's role in the telephone, electricity and banking industries.
"We are doing two things — making drastic reductions in the public sector and stimulating the private sector," Mr. Netanyahu said in an interview. "The country will undergo a short period of hardship as we decelerate from the old system and then there will be a great spurt of growth."
Mr. Netanyahu expects that surge in the second half of next year. In the meantime, Israel is enduring its third year of economic turbulence, one of the worst downturns in its history, and the finance minister is drawing mixed reviews.
As prime minister from 1996 to 1999, Mr. Netanyahu began efforts to open up the economy, which was prospering at the end of the decade with the high-tech boom, record numbers of tourists and growing foreign investment.
But in 2000, the high-tech bubble burst in the United States, bringing down Israel as well. Then came the Palestinian uprising in September 2000, which has stalled Israel's economy and has been a disaster for the Palestinians.
On the sidewalk outside the ivy-covered walls of the Finance Ministry, single mothers who are heavily dependent on government benefits have been camping out in tents for more than a week, demanding the restoration of subsidies.
"We can't live on what we are getting now," said Sagit Biton, a divorced, unemployed mother of four. Her monthly benefits have fallen to the equivalent of $790 from $977 as part of cuts enacted before Mr. Netanyahu's tenure, and are about to be reduced further. "I go to the unemployment office, but they don't have any jobs to offer."
With Prime Minister Ariel Sharon focused on the conflict with the Palestinians, he gave broad latitude to Mr. Netanyahu, whose economic restructuring package survived a wave of nationwide strikes and was approved by Parliament this spring.
But the protesters, numbering only a few dozen, have attracted extensive media coverage since Vicki Knafo, a divorced mother of three, walked more than 100 miles from her home to Mr. Netanyahu's doorstep to plead her case.
After criticism that he was insensitive to the hardships of the poor, Mr. Netanyahu met with Ms. Knafo. But her protest has been gaining steam and has led to similar long-distance walks to Jerusalem by impoverished Israelis from economically depressed towns.
Mr. Netanyahu's quest for a more market-oriented economy is faring much better in the office towers of Herzliya, the country's high-tech center along the Mediterranean coast, just north of Tel Aviv.
Yossi Sela, managing partner of Gemini Israel Funds, a leading venture capital firm, says the finance minister is chopping through the regulatory thicket that has long stifled Israel.
"He's trying to do the right thing by opening the economy and fixing the mismatch between the productive sector and the nonproductive sector, which has gone horribly wrong," said Mr. Sela. "We have to have a safety net for the really weak — we can't afford to have hunger in Israel. But we can't afford to support the nonproductive sector."
Mr. Sela gauges the improved climate through the mood of foreign investors, who shunned Israel after the Palestinian uprising. In the past few months, with a new peace plan gaining some momentum, Mr. Sela is again finding a receptive international audience. "We're not seen as lepers anymore," he said.
His firm has invested in about 70 companies over the past decade, but it made no new investments in the last half of 2002. Gemini has placed seed money in three new companies this year.
The economic barometers that measure confidence support Mr. Netanyahu's aggressive approach. The stock market was up almost 50 percent in the first half of this year in dollar terms. The currency has rallied from a low of 5 shekels to the dollar last year to 4.4 today. Interest rates are falling.
However, the economic fundamentals are still bleak. The overall economy contracted 1 percent in each of the last two years and is likely to be flat this year. Unemployment is approaching 11 percent, near an all-time high. The average Israeli salary is $1,628 a month and shrinking.
Israel's economy is an odd combination of the socialist ethos that dates to the country's founding in 1948 and an entrepreneurial, high-tech sector that flourished in the late 1990's.
The government sends a monthly check directly into the bank accounts of all families with children, regardless of financial circumstances. But Mr. Netanyahu has reduced financing for the program in perhaps his most controversial cost-cutting move.
A family with five children — not uncommon in Israel — has been receiving $440 a month. That will fall soon to $340 and eventually to $167.
Such programs are part of a public sector that accounts for 55 percent of the Israeli economy, and has been growing, compared with the 45 percent for the shrinking private sector. Mr. Netanyahu compares it to a lean, fit man obliged to carry a heavy man on his back.
"The guy on top needs to go on a diet, and the guy on bottom needs to be cut loose," he said. "If we don't change the scenario, pretty soon we would collapse."
The liberal newspaper Haaretz, often a critic of Mr. Netanyahu, says the effort to revitalize the country's work ethic and reduce benefit programs should be supported.
"The number of Israelis who collect supplementary income allowances has grown dramatically in the last decade, far beyond population growth and even more than unemployment can account for, indicating that a culture of idleness that condones living off benefits might be evolving here," Haaretz said in an editorial.
Many working Israelis feel overtaxed, and some are critical of the benefits extended to the ultra-Orthodox, who tend to have large families headed by men who devote their lives to studying the Torah, and do not work.
But in the short term, Israelis are hurting.
The Hazon Yeshaya soup kitchens, which have four of their five branches in Jerusalem, are now serving 2,000 meals a day, up from 500 when the economic downturn began three years ago.
"We see people coming in suits and ties between job interviews," said Abraham Israel, an American businessman who moved here and established the soup kitchens six years ago.
"The health of any society is a balanced budget, and we don't have one," said Mr. Israel. "But you can't do this on the backs of the weakest sector. We are putting working people, and even middle-income people, below the poverty line. This is asking for trouble." |
