Prime Minister Ehud Olmert will convene tomorrow a special meeting to discuss the collapsing dollar, following the fall in the shekel-dollar exchange rate to NIS 3.60/$. Governor of the Bank of Israel Prof. Stanley Fischer, Minister of Finance Ronnie Bar-On, Minister of Industry, Trade and Labor Eli Yishai, and National Economics Council head Prof. Manuel Trajtenberg will participate.
The Prime Minister's Office is calling the meeting a "learning opportunity". Manufacturers Association president Shraga Brosh and Histadrut chairman Ofer Eini are not invited. Earlier this week they warned of severe damage to the economy of the dollar's plunge continued and threatened a general strike.
Senior economic sources who spoke to "Globes" greatly lowered expectations about tomorrow's meeting. They doubt that Olmert will ask Fischer to cut the interest rate or intervene in the foreign currency market by buying dollars to stop the fall in the exchange rate. The sources said that there was little that the government could do. Even if it wanted to do something substantive like supporting the exchange rate or granting tax breaks on certain capital movements, such measures are banned by international treaties, and are liable to result in a severe reaction both by the OECD, which Israel wants to join, and by international investment houses and foreign investors.
The sources also noted that some situations are global, not local, events. The dollar is highly volatile, and can rise as much as it has fallen. The sources added that the private sector has tools to reduce the damage to exporters and the profitability of exports.
Published by Globes [online], Israel business news - www.globes-online.com - on February 6, 2008
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