Vote helps Israel dodge financial mess

Although Israel's beleaguered economy is nominally the top issue in Monday's national voting, the election campaign has helped defer any full-scale assault on the financial crisis.

Some Israeli economic and political experts fear the situation may not necessarily get much better after election day.

Neither of the two major political forces - the incumbent right-wing Likud or the opposition Labor Party - is likely to win the election handily enough to sense a clear national mandate on the economy.

The same goes for what are theoretically the campaign's other major issues: Israel's troop presence in Lebanon and the possibility of fresh peace moves with neighboring Jordan.

''There are issues in the campaign,'' says an Israeli political pundit. ''But both Likud and Labor have almost perfectly avoided anything resembling serious debate of them. On Lebanon, Labor talks and Likud talks past Labor. The opposite goes for the West Bank Jewish settlements and the related issue of peace with Jordan.''

Somehow the parties have managed to avoid even this degree of serious statement on the economy. The government of Prime Minister Yitzhak Shamir has, in addition, softened or suspended efforts to deal with the crisis in the weeks before polling day.

The Israeli news media have termed the Likud moves ''election economics.''

Likud practically wrote the book on that art three years ago, in Israel's last election campaign. For those who may recall Warren G. Harding's ''chicken in every pot,'' Likud last time around pioneered the ''video recorder in every living room,'' slashing import duties on this and various other prized items before election day.

This time, the scale of election economics has been more modest, the approach more subtle. Although Israel's inflation is still sprinting at an annual pace of roughly 400, the government recently slowed price hikes on various everyday items and has similarly moderated the rate of devaluation of the Israeli shekel.

Israeli pollster Hanoch Smith says such moves seem to be the main explanation for a considerable erosion in the past month of Labor's huge early campaign lead.

Labor's strategy has been to promise a hefty cut in government expenditure on at least two pricey items: West Bank settlement and the troop presence in Lebanon, which the opposition hopes to erase within six to nine months by working out an arrangement for United Nations troops to assume security responsibilities there.

But independent analysts here argue the country's economic problems run much deeper. A complex network of price subsidies and considerable ''linkage'' of wage hikes to the inflation rate have helped block head-on moves to cool the overheated economy.

Similarly, a huge foreign debt - attributable in large part to a military budget that even an early pullout from Lebanon would not seriously dent - requires state outlays for debt servicing that topped $2 billion last year.

One thing that has made it easy to avoid serious campaign debate on the economy is that experts in both main parties tend to agree on the kind of steps needed to deal with the economic crisis.

Among them is ''austerity'' at home and increased export earnings abroad. But as a local magazine put it last week: During the campaign, ''Both (parties) deny harboring any thought of austerity.''

The open question is whether, once past the elections, Labor or Likud will be a little less careful on that score. Israelis, according to opinion polls, suspect this is precisely what will happen, that no matter who wins, a bitter round of austerity and shekel devaluations are likely.

This explains a recent rush to buy dollars with laughably overvalued shekels - even at a black-market dollar rate that briefly hit 325 shekels against an official rate of 233.

Economic experts here, meanwhile, seem less sure than the layman that the election will necessarily usher in a full-scale austerity program. The argument is that no government will lightly embark on a move to dismantle the longstanding subsidy and linkage arrangements.

Much of Israel's foreign debt, moreover, is owed to a US government unlikely to lean hard for on-time repayment. There are also talks under way to establish an Israeli-US ''free-trade zone'' that would boost a shared Likud-Labor priority to shore up Israeli export earnings.

Likud has floated the idea of forming a joint ''national unity'' cabinet to allow serious repair work on the economy.

Labor, unsurprisingly, shrugged off the proposal of sharing government with a coalition it hopes to unseat from seven years in power. Instead, Labor has suggested that it hopes to use its dominance of Israel's national trade-union federation to reach a ''social contract'' on wage and price policy with the country's workers.

But since many individual laborers are closer to Likud, this may prove harder than it looks. And should Likud edge out Labor at the electoral finish line as happened three years ago, it remains to be seen whether union leaders will soften their pre-electoral reticence to seal a ''social contract'' with a reelected Likud coalition.

About these ads
Sponsored Content by LockerDome

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...

Save for later

Save
Cancel

Saved ( of items)

This item has been saved to read later from any device.
Access saved items through your user name at the top of the page.

View Saved Items

OK

Failed to save

You reached the limit of 20 saved items.
Please visit following link to manage you saved items.

View Saved Items

OK

Failed to save

You have already saved this item.

View Saved Items

OK