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Economic Plan Seeks to Reduce Inflation by 30 Percent

Finance Minister Simcha Ehrlich submitted a Five-year economic plan to the Cabinet yesterday aimed at reducing inflation by 30 percent by drastic curtailment of public consumption and further cuts in government spending. It was greeted with skepticism by many of his colleagues but a general debate was postponed until next week.

Ehrlich’s plan calls for a special budget to cover the redeployment of Israeli military forces from Sinai to the Negev. He promised almost full employment and to maintain the real value of wages. However, there would be an almost total freeze on public consumption and drastic cuts in private investment. Ehrlich also recommended periodic increases in the value-added tax (VAT) at the rate of one percent per year. The current VAT is 12 percent.

Yisrael Katz, Minister of Housing and Construction, claimed Ehrlich’s plan would impose the most severe burdens on the poorest sections of the population. Yitzhak Modai, Minister of Energy and Infrastructure, who is Ehrlich’s main rival in the Cabinet, announced that he would present an alternative economic program of his own.

Histodrut Secretary General Yeruham Meshel commented on hearing of Ehrlich’s plan that he would be willing to cooperate if the government accepted Histadrut’s demands. These include an adjustment of income tax brackets to keep pace with rising living costs and full compensation to workers for every increase in the cost-of-living index. However, Meshel emphasized that Histodrut will not permit Israel to become a paradise for the capitalists. “Ehrlich’s economic plan, he added, is designed to divert attention from his present failure to solve Israel’s economic problems.

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