NEW YORK (May. 15)
Addressing a luncheon meeting yesterday of national and New York Israel Bond leaders on Israel’s 27th anniversary, Israeli Finance Minister Yehoshua Rabinowitz emphasized that the military, political, and economic problems the nation faces today “are as crucial as in the days of our War of Independence.” Rabinowitz left for Israel last night after signing a joint statement with Secretary of the Treasury William Simon Tuesday in Washington aimed at expanding economic cooperation between Israel and the United States “particularly by increasing opportunities for trade and investment,”
Prior to his departure, Rabinowitz met with more than 100 members of the National Campaign Cabinet of Israel Bonds at the Regency Hotel where he stressed the importance of the agreement for the strengthening of Israel’s economy and underlined the role of Israel Bonds as a pioneering example of American investment in Israel’s economic development. Referring to the agreement Israel reached several days ago with the European Common Market, the Finance Minister described it as “a very important step for Israel both politically as well as economically.”
“But,” he added, “I must caution you against assuming that this agreement will solve all our economic problems. While it will open up new opportunities for development, it will also create a great many other problems and difficulties. The promise of wider trade relations with Europe also represents a challenge to our productivity and industrial growth,” he stated. The whole world is suffering from great economic and financial difficulties, the Finance Minister asserted, but “Israel has been hit harder than most countries….” Although the Arab boycott is not new, he said that during the past year “it has grown in strength and power as a result of the Arab states’ newly acquired oil wealth.”
FIVE MAJOR PROBLEMS
Rabinowitz stressed that the Arabs would not talk peace with an economically weak Israel, “Only a strong Israel will persuade them to reach a peace settlement,” he maintained. The Minister outlined five major problems confronting Israel at the present time: financing heavy defense expenditures; absorbing an increased immigration, and providing better social services for the population; improving the state of the balance of payments, and stopping the drain of foreign currency reserves; curbing inflationary pressures; and returning to a fast rate of growth of the economy.
Rabinowitz stated that “Israel’s main economic problem is its balance of payments.” He said that from 1972 through 1974 the balance of payments deteriorated drastically, increasing the deficit from $1 billion to $3,5 billion. This huge deficit came about, he explained, as a result of an increase in expenditures for three principal items: defense, oil, and basic foods.
Additional expenditures for these items alone added up to $2.7 billion,” he reported. Rabinowitz said that Israel’s foreign debt increased from $4 billion at the end of 1972 to $6 billion at the beginning of 1975 and that it was expected to reach $8 billion by the end of this year. “This,” he states, “is by far the highest debt per capita in the world.”