What Netanyahu will not tell about the Israeli economy
When it comes to the economy and you are an incumbent Prime Minister chasing another term, there are two rules: talk up the good news and hide the bad news.
The problem is that Israel is about to have a second general election within 6 months. That means that Netanyahu’s government spent the run up to tone recent election ignoring economic woes. Those awful numbers and their implications can no longer be hidden from the eyes of the voters.
Recap: By the end of 2018, it was becoming increasingly evident that the government budget deficit was getting out of control – shooting through the accepted target of 3% of GDP. The previous Governor of the Bank of Israel had warned against tax cuts and found herself out of a job. The Ministry of Finance repeatedly assured everyone that everything was a temporary blip. Aha!
I and other commentators have been writing on the subject for a long time. And what action of leadership have we seen this month to tackle the problem?
- The new Governor of the Bank of Israel, initially seen as a puppet of the Prime Minister, has warned of a debt ratio of 4.5%. That will damage the country’s ability to raise money for infrastructure projects. The larger the debt, the harsher the measures required.
- Apparently, the DG of the Ministry of Finance, Shai Babad has stated that Shaul Meridor is unfit to head the budget department. In other words, the two top civil servants on the matter do not trust each other. Oops!
- Some initial budget cuts were made a few days ago, but it looks like a hatch job to appease the markets. Everyone accepts that until there is an election on September 17th and a new government is formed – probably many weeks later – nothing will happen.
In other words, Netanyahu and his ministers are so busy saving themselves and their party that the country’s financial safety will just have to wait.