Political Unrest Follows Cabinet Decision Not to Abolish Subsidies on Basic Commodities
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Political Unrest Follows Cabinet Decision Not to Abolish Subsidies on Basic Commodities

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Widespread political unrest within the coalition was felt today after the Cabinet decided, at a dramatic emergency session last night, not to abolish or drastically slash government subsidies of basic foodstuffs.

Calls for the resignation of Finance Minister Simcha Ehrlich were heard, even from within his own Liberal Party, There were also proposals among the Liberals that the party’s four ministers resign from the Cabinet to protest the majority’s refusal to undertake the economic measures that the Treasury feels are vital.

The opposition Labor Party and the Shai faction have submitted no-confidence motions in the Knesset. Their spokesmen are expected to argue that the Cabinet has demonstrated that it has lost power to control the economy and take decisions. One decision reached at the meeting was immediately implemented. The Commerce Ministry announced today a 60 percent rise in the price of frozen meat which is imported from abroad.

One kilogram of average cut frozen meat will now cost around 1L.100, with variations depending on the precise cut. The price of gasoline is also expected to rise immediately by about 30 percent in accordance with last night’s Cabinet decision.

The big challenge facing the ministers was the elimination of price support subsidies for such basics as bread, sugar, oil, chicken and milk products. A decision was postponed after it became clear that the Treasury’s demands for drastic subsidy slashes would not win a Cabinet majority.


“It is perfectly justified for the Cabinet to hesitate, to wrestle with the problem,” Premier Menachem Begin told reporters in defense of the Cabinet’s decision not to decide. That decision was ridiculed as a “damp firecracker,” “a mountain that has given birth to a mouse,” and similar epithets by press pundits today. The entire nation was keyed up during the night to expect drastic price rises on the basic foodstuffs. Many of the press critics felt that this sense of expectation of the inevitable had now been squandered by the government’s hesitancy.

Ehrlich explained after the five-hour session that his figures, submitted earlier in the day by Treasury economists, had been so Draconian that it was clear to him in advance of the Cabinet session that there was no chance of implementing the full program of subsidy cuts.

The Treasury figures showed, for example, that without the subsidy the price of bread would rise by 160 percent — from 1L 2.50 for a regular loaf to 1L 6.50. Similarly, removal of the subsidy on cooking oil would mean a 160 percent price rise, and elimination of the mill subsidy would confront consumers with a 121 percent rise from 1L 5.10 a liter to 1L 11.30.

“What will a family with five children do?” Begin asked when Ebrlich and his deputy, Yehezkel Flomin, showed him the figures shortly before the Cabinet session begin. The Treasury has also prepared an elaborate system of “compensatory. payments,” through the cost-of-living mechanism and by additional child allowances and welfare payments, to ensure that the poorer sectors would not be too hard hit.

But Begin, and later the Cabinet majority, too, felt that despite the compensation arrangements the measures would be too violent and too sudden for the economy to bear. Ministers and coalition MKs, however, are angered not only by the government’s indecision but by the handling of last night’s meeting. If Ehrlich realized in advance that the Treasury program in its present form could not be accepted, several coalition politicians asked, why did he not call off the dramatic emergency meeting?

Shlomo Lorincz, of the Aguda Israel faction, chairman of the Knesset Finance Committee, flayed the government for jolting the economy in this way “You cannot call a dramatic nighttime meeting like this and then not decide to take action,” he said.

Other critics among the coalition members spoke with less restraint. Likud Whip Pessach Grupper said he would “demand explanations” and hinted that heads might have to roll in order to assuage rank-and-file criticism.


Indeed, the speculation in political circles here today was that a major Cabinet reshuffle it now very likely with Begin finally caving in to pressures to shunt Ehrlich aside.

One man who says openly that he wants Ehrlich’s job is Laam boss Yigal Hurwitz, former Minister of Commerce who resigned after the Camp David accords. But political pundits say it would be hard for the Premier to give this prime power post to the representative of what is one of the weakest and smallest components of the Likud. Hurwitz himself told reporters today that he would be prepared to re-enter the Cabinet only if the Treasury were offered to him “because it is in the Treasury that economic policy is really decided.”

The Liberal Party Central Committee is expected to convene tomorrow to discuss what its position is on economic policy at this stage and on Cabinet composition. Ehrlich told the party Knesset faction today that he was not considering resigning alone but seemed to indicate that he might not oppose the idea, advanced by a number of MKs, that the four Liberal ministers resign while the party remains in the coalition.

Meanwhile, the Israeli Pound dropped today to 1L 26 to $1.

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