Israeli coalition, an uneasy marriage of right and left, wobbles over economy

Just six weeks after its formation, Israel's national-unity government is in trouble. The government has failed to reassure Israelis that it can resolve the nation's economic crisis or end its increasingly unpopular occupation of south Lebanon.

When the uneasy marriage of the rightist Likud coalition and the left-leaning Labor Party began, it was touted as the only way to produce a government strong enough to deal with the nation's most urgent problems. But the government's brief honeymoon has already ended in a storm of criticism from the press, economists, and financiers over its efforts to restore the economy.

When the new government took office, inflation was running at about 400 percent, and it took about 380 Israeli shekels to purchase one dollar. Today, the annual projected inflation rate is nearing 1,000 percent, and it takes about 470 shekels to buy a dollar. Another devaluation is expected to be announced soon.

Israelis find that prices of some groceries are marked up twice daily. Merchants run a cash register with one hand and hold an official government price list in the other to show disbelieving customers that the higher prices are legitimate.

The government's announcement Tuesday that it has formed a long-awaited economic plan didn't help matters much. The plan includes a wage-and-price freeze, and a 35 to 40 percent cut in real gross wages compared with what they were in July. Also under the plan, thousands of civil servants would lose their jobs to enable the government to trim an additional $500 million from its $22.5 billion budget beyond the $1 billion in cuts already agreed on.

Israeli economic analysts have scorned the plan, which has yet to be accepted by the Histadrut labor union, which represents most Israeli employees, and by representatives of private employers.

''The government has missed a golden opportunity to set the economy on a path of recovery and stabilization,'' the generally pro-Labor English-language Jerusalem Post editorialized Wednesday. ''It has thereby as well threatened its own future.''

Indeed, there is growing speculation that this government may collapse long before its four-year term expires. The Cabinet often appears divided along party lines; a request from Prime Minister Shimon Peres last week that ministers refrain from criticizing the government publicly was reportedly rejected outright by Likud ministers.

Mr. Peres did not help his troubled government's image Monday when he gave a lackluster speech to the reconvened parliament. He promised that the government would concentrate on restraining inflation and spurring economic growth; he urged Israelis to tighten their belts.

But the next day, the Treasury announced a 24 percent price increase for most subsidized staple foods and fuel. The increase will inevitably lead to an even more inflation, at least temporarily.

The hyperinflation is eroding wages at such a rate that even the indexing of wages to increases in the cost-of-living index is breaking down. For years wage indexing has protected most Israeli wage earners from the effects of inflation.

''If the government were to freeze wages and prices today, we would have an automatic decrease in salaries of 8 to 10 percent already, because the workers' wages have not yet been compensated for inflation this month,'' says Daniel Rosalio, secretary-general of Hevrat Ovdim, the Histadrut's giant industrial holding company.

The Histadrut has said it is willing to make concessions on wages, but only if it is assured that the burden of the economic cuts will be spread among all sectors of the economy.

In foreign policy, the government has been unable to produce any victory that might offset the gloomy domestic picture.

Although there was diplomatic action on south Lebanon last month, Likud Cabinet minister Ariel Sharon sharply criticized statements by Peres that Israel was willing to withdraw completely from south Lebanon and accept an expanded role for United Nations forces there.

In an interview with Israel Radio last week, Mr. Sharon, minister of trade and industry, said he would not accept any withdrawal plan that called for relying on UN forces to protect Israel's northern border from guerrilla attacks. Although no Likud minister has backed his criticisms, Sharon can be expected to continue his attacks on the policies of Peres and Defense Minister Yitzhak Rabin on south Lebanon and the Israeli-occupied West Bank.

Peres and Mr. Rabin continue to say that Israel will withdraw from south Lebanon; they have moved to liberalize the military government's policies on the West Bank.

The only bright spot for the new government is that Peres did obtain assurances from the Reagan administration two weeks ago that economic aid to Israel would be increased to help during the economic crisis. The Israelis expect the US Congress to grant between $500 million and $1 billion in economic aid in addition to the $1.4 billion in grants already voted for the current fiscal year.

But some Israeli economists have criticized even this achievement, complaining that by immediately turning to the US for help, Peres was tacitly encouraging Israelis to rely on an outside bailout to solve their economic woes.

In addition to its external problems, the new government is also plagued by maneuvering inside the Cabinet among the various factions.

The Likud bloc itself is beset with internal problems: Its Liberal Party members and Herut Party members are at odds, and the Liberal Party has threatened to split from Likud altogether.

All the bickering may be, as one Labor official said, ''just the Cabinet members getting used to each other and seeing how far they can push,'' or it may portend an inability of the government to deal even with issues most Israelis agree must be solved immediately.

''If this government cannot heal the economy and get us out of Lebanon, then there is no purpose for it,'' the Labor official said flatly.

Already, the official said privately, some Labor leaders are hoping that the 13 Liberal Party parliament members will leave the Likud and join Labor. Should that happen, Labor might be able to form a coalition government without the Likud.

''In September, we had to form a national-unity government, because we had no choice. The nation would not have accepted a breakdown of talks between us and the Likud,'' said the official. ''But today the situation is different.''

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