Cabinet Adopts Package Deal on Wages, Prices and Taxes for 1970 to Curb Inflation

The Cabinet today adopted a three-way package deal on wages, prices and taxes for fiscal 1970 which is supposed to stabilize the Israel pound and prevent run-away inflation. The measure, championed by Finance Minister Pinhas Sapir, was passed without opposition although the head of the Bank of Israel and a number of leading economists have expressed serious misgivings that it will solve Israel’s economic problems. The Cabinet also approved a draft budget for 1970 of approximately $3.5 billion for submission to the Knesset on Feb. 16. The budget is pegged to the package agreement signed yesterday by the three elements that determine the country’s economic health–labor, management and the Government.

Under its terms, Israel’s manufacturers and industrialists will pay an eight percent wage increase this year, half of it in cash and half in six-year Government bonds bearing five percent interest. The employers themselves will buy Government bonds equivalent to four percent of the wage hike. Histadrut, Israel’s all-embracing trade union federation, agreed to make no further wage demands and the manufacturers have promised not to raise prices on basic commodities. The Government pledged on its part not to impose high taxes and duties this year, though it will raise the tariffs on luxury items such as imported automobiles and television sets. It also reserved the right to impose additional levies on gasoline, auto repairs and imported alcoholic beverages “if necessary.”

BUDGET CRITICIZED AS UNREALISTIC WAY TO SOLVE ISRAEL’S ECONOMIC PROBLEMS

David Horowitz, Governor of the Bank of Israel who attended the budget session, criticized the package deal which he said, would not repair the growing damage to the country’s balance of payments. Earlier, a group of economic professors and heads of the economic faculties of several Israeli universities appealed to the Government. Histadrut and the manufactures not to sign the pact. They said it would not solve Israel’s economic problems and maintained that the only solution was to devalue the Israel pound in order to lower Israel’s debts abroad. Mr. Sapir said he did not “see eye-to-eye” with

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