European economies are hiding their economic dismay by claiming that they can relaunch growth while consolidating. Seems a nonsequiter to me.

Now try this. The Israeli government, regional economic powerhouse and boasting a record of 4% annual growth for much of the past decade, has spent the past 9 months preaching that its fiscal deficit is under control. The spin was that ‘we know we have a budgetary gap of 14 billion shekels and it is planned for’.

As I have written for much of the period, this was irresponsible tripe – another non sequiter. As if to prove it, Yair Lapid – new to politics and new to economics and new to the position of Minister of Finance – has declared that the overdraft is worse than feared. VAT looks set to rise. Corporation tax will join the trend. Payments to large families will be chopped. The army will have to make do with fewer purchases this coming year. Quelle surprise that many of these issues take on former ‘untouchables’ of the Prime Minister and political allies of his previous government.

The recent British budget tried to kick-start growth by providing aid to small business. In Israel, this has been available in various forms for many  years. And there has been a heavy emphasis on help for entrepreneurs in high tech. The result? According to new figures, the average value of exists per year for the past decade is over US$4 billion, involving a total of 772 companies. Very praiseworthy.

The down side is that the banks have been making a fortune on the rest, who simply struggle with their cash flows. An analysis of Israel’s five leading banks, which was published in Hebrew this week in the “Calcalist” newspaper reveals that their profit on loans to small businesses reaches 23%. And all this while some of these hand outs are backed by the government.

To clarify – as opposed to a non sequiter, this is a rip off. It is a hindrance to growth. Add in to that the guarantees which the banks demand and the paperwork to be filed, you have to question if the banks are really interested in helping new customers succeed. More pertinently, you wonder why the mandarins in Jerusalem have allowed this system to thrive. Undeclared conflicts of interest?

The lesson is simple. If Mr Lapid really wants to reset the economy, do something for budding artisans and entrepreneurs which will impact positively on growth, he needs to address quickly the needs of small business….which makes up over 95% of most economies around the world.