Economic Package Deal Killed
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Economic Package Deal Killed

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The economic package deal to freeze wages, prices, profits and taxes until after the May 17 election suffered a decisive blow today when the National Religious Party Knesset faction said it would vote against it. The deal was worked out two weeks ago between the government and Histadrut in the hope that it would gain the support of some opposition factions. But with the NRP’s announcement, there is no chance to adopt it in the Knesset.

NRP Knesseters told reporters today that originally they had their doubts whether to support the bill, but once the government opened its coffers to all comers–a reference to the recent massive wage raises–the NRP’s doubts were removed. The government originally intended to implement the package deal in the form of regulations and ordinances in case it could not succeed in having the bill adopted in the Knesset. However, according to some legal experts such measures cannot be implemented by the Cabinet without Knesset approval.

In a sense, the freeze had already been killed before the Knesset action. Originally, the government announced the plan, in the words of a Cabinet communique, “to introduce an atmosphere of calmness” into the economy. The actual effect was the complete opposite. Worker groups, for fear of being caught by the general freeze before they got their raises, went on general strikes. In most cases, this proved effective. Some 300,000 civil servants received in recent weeks pay raises of up to 20 percent which under present estimates will cost the public IL one billion more than was originally planned.


The latest such increase came at dawn today when a strike of 55,000 civil servants was averted when the government agreed to provide them with increases of IL 100 to IL 800 a month. The increase also covers another 100,000 employees of municipalities, universities and the Jewish Agency. Industrial workers are now expected to ask the same increases given government employees. This means that the wage freeze has been broken and the Manufacturers Association is expected to demand price hikes.

Many companies have already raised their prices, for the very same reasons that the workers groups demanded wage hikes–fear of the freeze. The more money the public has, the greater demand is felt in the economy for consumer products, and there are already reports of revival in the generally slow market of consumer goods.

The government is likely to stick to its promise not to raise taxes until the election, but there is no doubt that drastic economic measures will be taken shortly after the election in an effort to curb the very inflation the government is now boosting.


Meanwhile Yisrael Kargman, chairman of the Knesset Finance Committee and a veteran of the Labor Party, criticized the government party for giving in to labor pressure groups. He said that had he been asked he would have suggested that the government refuse to approve wage hikes. “A general strike for one month would have taught the public what this is all about,” he said in a radio interview.

“Economically speaking, all those who have received raises live in an illusion, because who do you think is going to pay all this?” He suggested that the public sector would need much more than IL one billion to finance the pay hikes. It will, he noted, in fact be closer to IL two billion. Kargman said it would be the public who would finally pay the raises, either because of the inflation caused by printing money or by large-scale tax hikes.

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