Mapam Seeks Major Changes in Austerity Plan; Threatens to Quit Cabinet

Leaders of the leftwing Mapam Party warned premier Levi Eshkol today that Mapam would not be able to continue in the coalition, if Finance Minister Pinhas Sapir’s three-year austerity program for Israel was adopted without major changes.

The plan, designed to cope with Israel’s economic problems and to eliminate a $500,000,000 annual unfavorable trade balance, calls for a ban on wage increases for three years except when tied to greater productivity; payment of the cost-of-living allowance once a year instead of every six months; special legislation to prevent strikes affecting exports, such as those that recently tied up the Haifa and Ashdod ports; encouragement of industry to increase productivity and penalties for industries failing to boost efficiency and output.

The plan calls for a growth in annual exports of $450,000,000 by 1969 and proposes creation of nearly 40,000 new jobs, primarily in export industries, import substituting industries and slum clearance projects. Also provided for are special benefits for export enterprises in tax rebates and exemptions from national insurance premium payments.

The plan would also continue a second stage of an import liberalization program with a gradual lowering of customs rates on competitive imports and establishment of large joint marketing firms to sell export products of small industries.

FINANCE MINISTER WARNS ISRAELI FIRMS; FORESEES 50,000 UNEMPLOYED IN 1969

In presenting the program the Finance Minister warned that firms unable to operate under the lower protective tariffs would have to close down, even if it meant increasing joblessness. The plan envisions 50,000 unemployed workers in 1969.

Abolition of the legal maximum on interest rates also was proposed, while low interest loans would continue to be available for “productive branches. ” The plan assumes no increases in Government and municipal taxes but calls for a new gifts tax to supplement the inheritance taxes and a capital tax to replace the present property taxes on equipment and stocks.

Mapam leaders Yaacov Hazan and Israeli Barzilai were reported to have warned the Premier that they could not accept “sacrificing the workers’ interests” without similar steps being taken for industry and business. The Premier reportedly promised them that before the Government would act on the Sapir plan, it would be discussed informally by the coalition partners.

A certain coolness about the Sapir plan also has been reported among members of Achdut Avodah, the Mapai’s alignment partner. These members also have asked for additional clarifications about the plan.

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