Jerusalem (Jan. 20)
Israel’s newly appointed Finance Minister, Yoram Aridor, is expected to introduce an economic program to slow the steady devaluation of the Shekel, improve labor relations, encourage long-term investments and savings by the public and, hopefully, reduce the annual inflation rate, now at a record 130 percent-plus to a more manageable double digit figure.
Much of Aridor’s program was recommended to his predecessor, Yigal Hurwitz, in an economic plan paper submitted a month ago, close associates of the new Finance Minister told reporters today. He is expected to continue Hurwitz’s policy of slashing government spending which he considers absolutely essential if inflation is to be contained. That proved to be Hurwitz’s most formidable obstacle. He achieved only limited success and resigned over the issue Jan. 11.
ELEMENTS OF NEW ECONOMIC PLAN
Aridor intends to prop up the Shekel by offering the public foreign currency saving schemes. A stronger Shekel would have adverse effects on exports which rose substantially during Hurwitz’s regime, his most notable achievement. Aridor is said to be ready to recommend additional incentives and compensation to exporters who find it hard to market their goods abroad without a cheap Shekel.
Aridor will make wage and salary increases dependent entirely on increased productivity. He believes this formula would lead to labor peace by cushioning wage-earners against inflation and offering them a tangible inducement to improve productivity and at the same time, would peg cost-of-living increments to 100 percent of the price index and pay them monthly instead of quarterly. At present, the increments do not cover the full rise of the price index.
Aridor is said to favor a reduced tax on fuel and does not believe the tax should go up every time the price of fuel rises. Thus, he believes, the economy would be less subject to periodic jolts. He would offset the fuel tax reduction by a one-time large increase in the value-added tax (VAT). The new Finance Minister also wants to make government saving schemes more attractive to investors as a means of absorbing the excess money supply.
Aridor, who is chairman of the Herut Executive, was Premier Menachem Begin’s choice to succeed Hurwitz. His appointment was approved by the Cabinet yesterday after Likud’s Liberal Party wing withdrew its objections. Part of the deal with the Liberals was the naming of one of its leaders, Minister of Commerce and Industry Gideon Patt, as chairman of the Cabinet’s economic committee. Another top Liberal, Energy Minister Yitzhak Modai, will be a member of that powerful body.
Aridor also pledged not to tamper with two key elements of the Liberal’s economic program–the foreign exchange regulations established by former Finance Minister Simcha Ehrlich and a tax exemption for profits realized on stock market investments. He also promised not to raise direct taxes beyond their present levels.