Austerity Regime Introduced; Huge Price Increases Announced
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Austerity Regime Introduced; Huge Price Increases Announced

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The government today announced a spate of immediate economic measures which will mean in effect a deliberate slowdown of the economy and an austerity regime affecting every Israeli household. On the national level there is to be a tight credit squeeze, and a halt to government development projects, including the building of new schools and hospitals.

On the level of the family budget, milk and milk products will rise in price by 100 percent public transport by 50 percent, electricity by nearly 40 percent and postal services by 30 percent. An oil price hike is also expected imminently which will set off a new chain of price rises throughout the economy.

These figures, reported unofficially this evening, were confirmed by Finance Minister Yigal Hurwitz in a live television interview tonight. “The time has come to tell the truth,” he declared. “Another nation could live on the amount of money we waste.” He noted that the inflation rate is eight percent per month which is 100 percent per year. He said the proposed measures will make the economy more efficient but cautioned that inflation will not decline in the first 2-3 months.

Hurwitz said Israel’s annual balance of trade deficit stands at $4.3 billion. The measures being introduced will “freeze” services which are “greatly swollen,” he said. “There will be no new developments, no new schools, no new hospitals. Even projects which have been agreed upon will be re-examined unless contracts have actually been signed.”

He said that “credit which is fueling inflation” will be slashed. It will be allowed to rise by only nine percent in the next three months. “Government subsidies have been completely abolished for milk and milk products and for cooking oil and will soon be abolished for meat,” he said.

Hurwitz also declared that there would be “no new wage agreements until 1981,” meaning that wage contracts which come up for renewal in 1980 will be extended for a year. “Everybody has got to work more and produce more. Let us go back to our youth when we made do with a little and produced a lot,” Hurwitz said.


Hurwitz’s economic “war cabinet” was in session for seven hours before issuing its Draconian decisions. It had been mandated yesterday by the full Cabinet to take action designed to curb inflation, currently running at more than 100 percent.

Treasury economists say the new measures alone will add some five percent to the cost of living index. The economic cabinet provided for compensation to be paid at once to the poorer sections of the population, such as welfare recipients and widows. Child allowances will also go up at once by some five percent, and all wage earners will receive cost of living increments from December instead of waiting for the scheduled April payment date.

Acting Histadrut Secretary General Israel Keisar said the labor federation would demand that c.o.l. increments be pegged 100 percent to inflation, and not 80 percent as at present. He criticized the government’s plan as “another round of price hikes which will mean hardship for the weakest sections of the populace.”

The government plans, according to the officials, will lead to reductions in the civil service and in service sectors, and the deliberate intention is to direct and encourage manpower to move to export-oriented industries.

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