Knesset Approves Israel’s Tough New Austerity Program

The government’s austerity economic program was approved in the Knesset yesterday by a 52-4 vote. All the affirmative votes came from coalition members while the four opponents were from the Rakah Communist and Moked. The two large opposition factions. Likud and the National Religious Party, abstained while the five-vote Aguda faction did not participate. Yehoshua Haftabi of the NRP said the opposition would not vote against the new measures even though they were “too little and too late.”

Finance Minister Yehoshua Rabinowitz had earlier told the Knesset that his new program was fair and socially equitable since it hit the upper income groups hardest. However, he said wage-earners had to undertake their fair share of the burden and renewed his call on the Histadrut to agree to a 50 percent reduction in a 20 percent cost-of-living allowance due this month. But Histadrut Secretary Yeruham Meshel again said that the labor federation would continue to insist on the full 20 percent. He warned that the credibility of both the government and the Histadrut would suffer with the workers if the COL agreement was modified. He predicted labor unrest.

Meanwhile, Police Minister Sholom Hillel revealed that he was the only minister who did not support the plan in Sunday’s all-night Cabinet session. He said he abstained because he feared the “bulldozer” economic plan would crush not only inflation but also efforts to close the social gap and raise the living standards of the poor. Hillel is chairman of the Ministerial Committee on Social Welfare.

While the Knesset was adopting the program, analysts and consumers were totaling up the costs of the new programs. The across-the-board 10 percent levy on imports is expected to push up the prices of imported goods three to six percent. It is also expected to cause a two to four percent increase in the prices of locally manufactured goods containing imported components.

The three percent raise on the war loan, pushing it up to 10 percent of income, will mean a considerable pinch on the take-home pay of salaried employes and on the earnings and profits of the self-employed. The one-time property tax will affect all car owners, who will now have to pay five percent of the value of their automobiles in three annual payments. Landowners and business men will have to pay five percent on all their holdings except for the homes in which they lives and the stock and machinery in their factories and warehouses. The government has promised that within a week, welfare recipients and large families will be informed how much they are to receive from the government to compensate for the price increases caused by the new program.