Prime Minister Benjamin Netanyahu and Finance Minister Yuval Steinitz presented the main points of their new financial plan for the Israeli market Thursday, ahead of presenting it to the government next week.
The plan, explained the prime minister, is based on the need to contain the current crisis and induce market growth while implementing the market bailout plan.
"We are in the midst of a deep crisis but we can and will pull Israel's economy out o fit. Our mission is a double one – to maintain jobs and to induce the market. We were able to do it in the past and we will do it again."
Steinitz added that he hopes to see the market showing clear signs of growth within the next year or two. The finance minister stressed that additional parts of the plan were still being devised.
The plan focused on two main issues – curbing unemployment and finding a solution to the credit crunch, both in and outside the banking sector.
The plan also called for the following:
- A continued reduction of income and corporate taxes through to 2016
- Instating negative income tax, meaning people earning below a certain amount are granted government income supplements, instead of paying taxes
- A massive extension of state-backed credit lines for the banking sector. The government will also back export and high-tech industries and increase funding to the Small and Medium Enterprise Authority (SMEA)
- Instating a reform in the Israel Land Authority in order to reduce land prices and advancing the suggested reforms in Israel Electric Corp. and the Israel Port Authority; as well as introducing a reform which would allow mayor to form independent policing units
- Providing increased infrastructural funding, as well as in tourism, transportation and water and power infrastructure
Neither Netanyahu nor Steinitz, however, detailed the costs involved in making the plan a reality, and neither would comment on any possible cutbacks in the state budget.
The government will debate the plan as part of its session on the 2009-2010 budget proposals and the arrangements bill. The plan stands to be approved by mid May, and put to the Knesset's vote by Mid July.
The Bank of Israel praised the Treasury for the plan's outline, saying the plan will contribute greatly to Israel's ability to weather the worldwide financial crisis; adding that its implementation will constitute a positive step in the country's dealing with the crisis.
Meretz Chairman Chaim Oron faulted the plan, saying that lateral cutbacks will prove detrimental to the weaker socioeconomic echelons, since it infers cuts in government services. The plan, he added, only serves to help the top echelons by lowering taxes.
Knesset Member Yohanan Plesner (Kadima) also criticized the proposed plan, saying that it will only harm essential national interest. "Netanyahu has clearly chosen politics over the economy," he said.
The Kadima party also issued the following statement: "Netanyahu's financial bluff has been exposed… proving that the government cannot provide a satisfactory answer to the market's needs. This plan in full of verbiage and holes… Netanyahu expects the public to forget he spent billions on his inflated government."
Shraga Brosh, president of the Manufacturers Association of Israel said he was pleased with the overall outline of the plan, since "it focused on what's really important – encouraging exports and facilitating credit." Nevertheless, he added, the plan's details "still have to prove themselves."
Amnon Meranda, Tani Goldstein and Amnon Atad contributed to this report