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Israel Imposes Three Months Price Freeze – Crackdown on Price Offenders

The Government announced today a three month selective price freeze effective immediately, and other measures designed to curb inflation and cool off an overheated market, mainly-in the building industry.

The Cabinet also announced a crackdown on price offenders; But it delayed a decision to raise interest rates until the return of Finance Minister Pinhas Sapir who is presently visiting the United States.

The Cabinet’s action put an official-Stamp on what the press and public knew a week ago would be the first-price=freeze instituted by an Israeli government in an election year. It will be in effect until Sept. 30, less than a month before election day.

Reports last week said a 60-day freeze was being contemplated. The extended period was apparently ordered by Sapir who said in a telephone interview with the newspaper Yediot Achronot today that the freeze would last three months.

GOVERNMENT SUBSIDIES

During that period a total freeze will be applied to 14 basic commodities which are normally subsidized by the government to keep their prices stable. The government will absorb price increases on any of these items due to increases on the world market-a subsidy that it is estimated will cost the government IL 20 million a month.

A total freeze will also be applied to bus and train tickets, electricity and telephone rates and on services such as hotel rooms, restaurants, laundries and hair-dressers.

Manufacturers will be required to absorb price rises in imported raw materials which increase the cost of their finished product by up to two percent. Beyond two percent they may apply to the government to raise their prices.

The manufacturers must also absorb the ten percent cost-of-living allowance that the government has decided to pay workers in July and which, it is estimated, will add 1-1/2 percent to the cost of finished products. Manufacturers therefore will have to absorb at least a 3-1/2 percent increase in their costs before they can ask the government for relief.

The freeze will not be applied to fruits and vegetables which fluctuate in price according to season

Other measures include the appointment of a ministerial committee to check on all public building programs with a view to cancelling or postponing projects that are inflationary. Limits, yet to be formulated, will be applied to the construction of luxury flats while higher priority is given to low cost home building.

New regulations will be promulgated empowering magistrate courts in each town to rule on price offenders. The intention is to speed up the judicial process and to make the laws more effective.

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