Ahead of the New Year holiday, "Globes" spoke with Minister of Finance Ronnie Bar-On. "It's clear there will be a slowdown," says Bar-On. "The combination of a global financial crisis and an economic slowdown in most Western countries, the additional negative effects on the Israeli economy, such as persistent extreme volatility in exchange rates, inflationary trends, and possible developments in credit, lead to the clear conclusion that we can expect a slowdown in economic activity. The strength of these factors on a slowdown is still difficult to foresee."
"Globes": The 2009 budget presumes 3.5% GDP growth. Is this realistic, and will you change the budget?
Bar-On: "We're aware that this is the high-end projection, and we're seeing trends in projections of tax revenues. However, it would be a mistake to review and reexamine growth projections and deficit targets in the midst of the current uncertainty. At this moment, it's better to continue with current policy, while knowing that a deviation from the projections means the activation of automatic correcting mechanisms."
Minister of Foreign Affairs Tzipi Livni said, "This year, Israel must commit to taking a cautious and conservative policy, and avoid unnecessary increases in government spending, while supporting growth engines, especially industrial and technology exports."
"Well said and true."
Can she do it?
"As minister of finance, I'll do everything I can to do it."
This might be your last interview.
(With a broad grin): "If you leave journalism, this will be the last interview. Me? I'll still be hear at the Ministry of Finance."
Shas and Labor may demand your head as Livni tries to build a coalition.
"To the extent that it depends on me, I'm the finance minister, and I want to keep my job. Precisely now, it's very important to have a finance minister who knows the system, knows the people, and is experienced. I want this job; it's important for me to have it."
What don’t you know how to deal with?
"Four and a half months ago, I said that as long as I was finance minister, the child's allowance would not be raised. I have no argument with Shas over the need to do everything to pull children out of the cycle of poverty and reduce poverty, but in my opinion, they way to do it is by transferring money that will ease poor people's plight but I will not create disincentives for them to go to work. We're waging a battle over percentages in the unemployment rate and participation in the labor force, especially in the haredi (ultra-orthodox) and non-Jewish sectors, and we've had results that we haven’t had for 20 years. We unequivocally identify with the poor."
What about the dilemma between a coalition and allotments?
"Today, we know how to prove that participation in the labor market is the way to emerge from poverty, and it happens."
Shas chairman and Minister of Industry, Trade and Labor Eli Yishai wants to show money to his constituents.
"We're making every effort, and I hope that my opinion will persuade or prevail. I went through this four months ago, when there was a clear and present danger to topple the government and hold early elections, when even the high priest of allotments cutting, [opposition leader Likud chairman MK] Benjamin Netanyahu promised Shas higher allotments."
You can't stay quiet; for you, Netanyahu is like waving a red cape before bull.
"What did I say? That he's the 'high priest'? That he said?"
Minister of National Infrastructures Benjamin Ben-Eliezer said that if the Americans inject $1 trillion into the US economy, nothing would happen if Bar-On injects NIS 2-3 billion into the Israeli economy.
"If the Americans are so generous, then Fuad [Ben-Eliezer] should go to America for aid. We won't. I don’t understand that style at all."
You've been told: 'Add another billion shekels or two and let the government work. Big deal.'
"Big deal, big deal; I hear this four times a day, every day, 360 days a year. Everyone has his own 'no big deal'… What's another hundred million, what's another puny billion… Everyone has his own proposal. There's another problem in the Labor Party, which promises its constituents that it will raise the spending ceiling to 2.5% of GDP."
The US financial crisis seems to have been the result of regulatory failure. Israel also seems to lack proper supervision of the public's money by the banks, insurance companies, and investment houses.
"I advise not to jump to conclusions. The US isn't Israel. We used to say that we wish we could be like America, and today we're happy that we're not. We have a different market here, different regulations, different exposure, different instruments. Their complex casino is something completely different. I don’t accept the arguments that we should panic."
Supervisor of Capital Markets, Insurance and Savings Yadin Antebi and Israel Securities Authority chairman Zohar Goshen are issuing orders to companies to disclose their exposure.
"Come on, we're always issuing regulations and making them tighter. We're checking exposure to make sure that there won't be a crisis; that we won't be alerted too late. Antebi constantly orders exposure checks; nothing extraordinary is going on. It's only that someone in the market decided to tell you about it now."
Do you think that Governor of the Bank of Israel Prof. Stanley Fischer should continue to buy dollars?
"I think that the situation of the dollar and its affect on Israeli exports are problems, and we must constantly watch developments. I don’t suggest to Fischer through the press what to do in the realm of his authority."
Will you be remembered as a finance minister who didn’t initiate any reform?.
"Come on already. You go and try to enact reforms with this fragmented Knesset. Even in my party, Kadima, this one is angry that she not made a minister, and that one wants NIS 1.5 billion for settlements. The Ariav committee is trying to formulate capital market reforms, and you know about the fight with Yishai over the Wisconsin plan. It's exasperating. There are constant battles over foreign workers, Israel Electric Corporation (IEC); slowly, slowly - nothing happens overnight."
Will you implement more tax cuts?
"It has been demonstrated that tax cuts and making the economy more attractive and competitive for investment is necessary. But you have to look at the situation. How much can you do now, and how will affect the debt-to-GDP ratio. We're constantly checking this.
Last question: You've been quite quiet as finance minister. This isn't how we imagined you to be, since you've always been quite outspoken.
"Do you like it or not?"
We quite like it.
"Then I'm happy. Happy New Year."
Published by Globes [online], Israel business news - www.globes-online.com - on September 29, 2008
© Copyright of Globes Publisher Itonut (1983) Ltd. 2008