Israelis cool toward price freeze

For Israeli homemaker Hila Hite, the three-month wage-and-price freeze begun here this week means one thing: For 90 days she will know what to expect when she walks into a supermarket - maybe.

''Until now, when I went to buy something, I never paid the same price twice, '' the mother of two says. ''I hope this will mean fixed prices. But we'll see. I don't believe in this package deal.''

Mrs. Hite's skepticism is typical of Israelis who have grown cynical about their government's ability to rebuild an economy racked by raging inflation, low productivity, and a steady drain of foreign currency reserves.

The first few days of the package deal seem to have done little to end the chaotic appearance of the Israeli economy.

First, the government failed to come up with a list of allowed prices on items affected by the freeze, then it came out with a list of incorrect prices.

Finally, on Wednesday, Israelis found printed in their daily newspapers lists of more than 400 basic items for which the government has set maximum prices.

Prime Minister Shimon Peres stalked the aisles of a Jerusalem supermarket Tuesday, accompanied by dozens of reporters, aides, and officials, urging shoppers to carry their printed price lists with them whenever they shop.

Mr. Peres called on Israelis to help enforce the price freeze by reporting violators. The government has issued telephone numbers to call if customers feel they have been overcharged. It has promised to prosecute manufacturers and shopkeepers who charge more than the authorized amount.

Hila Hite says she doesn't believe the government's plan will be supported by the public.

''People here are not willing to help the government,'' she says. ''They care more about protecting their own money.''

The long-awaited package deal signed Monday by the government, the Histadrut (Israel's giant labor union), and manufacturing representatives is designed to reduce an inflation rate that last month reached more than 800 percent on an annual projected basis.

A keystone of the agreement is an erosion in real wages caused by a temporary reduction of the automatic cost-of-living increase most Israeli workers receive each month so that their wages keep pace with inflation.

In addition, the agreement tries to encourage individual savings among Israelis by adjusting bank interest rates.

But within 24 hours after it took effect, the plan was being attacked by economic analysts in the nation's press.

''... The package deal approach to solving the inflation problem is doomed to failure,'' wrote an analyst in the English-language Jerusalem Post.

The prestigious Haaretz newspaper predicted that the deal was only ''placing inflation in suspended animation for the next three months.'' Israelis, the paper said, would simply wait until the end of the three-month freeze and then begin spending wildly again, ''causing such dizzying inflation as to make October's price rises appear moderate by comparison.''

Several analysts predict the black market will flourish, particularly among retailers who import some or all of their goods. Importers will be forced to continue paying more money for imported goods as the shekel continues to lose value against the dollar, but they will have to charge the same prices to their customers.

''A shekel at the beginning of November will be worth at least 25 percent, perhaps even 30 percent, more in real terms than a shekel at the end of January 1985 when the freeze ends,'' says Ilan Barzel, head of a financial consultancy firm, in an interview with an Israeli newspaper.

''Manufacturers will gradually lose more and more money, and once their stocks are sold out, they will stop producing for the local market.''

Some merchants already have advertised ''closing shop'' sales because they would rather go out of business for three months than take the anticipated losses.

Perhaps the most the government hopes to gain from the temporary freeze is a psychological advantage - giving the public the knowledge that for a while, at least, what they earn and what they pay will be predictable.

But even that goal may not be reached, according to some analysts.

Hite's view, again, seems typical.

''After three months, the inflation will just blow up again,'' she says. ''The government has done nothing to change things for the better permanently. The people in this government can't do anything really, because they have to make so many compromises with each other.''

It is still unclear how closely the government will be able to enforce the price freeze while it exists.

The Ministry of Trade and Industry had on hand only two dozen price inspectors to make checks throughout the country when the package deal was signed. Customs officials and volunteers from the Histadrut have since been pressed into service.

Some analysts are already predicting that the plan will be scrapped before the three months are up, and the government will try something else to patch together the splintering economy.

of 5 stories this month > Get unlimited stories
You've read 5 of 5 free stories

Only $1 for your first month.

Get unlimited Monitor journalism.