Shamir’s Coalition Defeats a Motion of Non-confidence by a 61-54 Vote

Premier Yitzhak Shamir’s coalition easily defeated an opposition non-confidence motion in the Knesset today. The motion, backed by the Labor Alignment, Shinui and the Hadash (Communist) Party was knocked down by a 61-54 vote after an abrasive debate over the government’s economic policies.

The debate gave the newly installed Finance Minister, Yigal Cohen-Orgad, an opportunity to outline the measures he intends to take to extricate the country from its current economic crisis. He predicted that the crisis would end “within the very near future” and accused the opposition of exaggerating its depth, thereby damaging public confidence.

Opposition spokesmen focussed on two issues — the aborted plan of former Finance Minister Yoram Aridor to link Israel’s currency exclusively to the U.S Dollar and the government’s apparent agreement to bail out commercial banks by shoring up the price of bank shares when the Tel Aviv stock exchange resumes trading, probably this Sunday.

Labor MK Gad Yaacobi charged that Shamir, contrary to his disclaimers, knew of and endorsed the Aridor plan inasmuch as the Finance Minister disclosed, before he resigned under fire last Thursday, that the plan was in the making within the Likud coalition for the past six months.

Shamir has acknowledged that it had been “an idea for discussion” but claimed he never took it seriously as government policy until an aide to Aridor leaked it to the press last Thursday. The leak triggered a massive run on Dollars and precipitated Aridor’s departure.

The government’s reported agreement to support bank shares was denounced by Shunui MK Amnon Rubinstein as “moral anarchy” designed, he said, to protect the banks, not the small investors.

OUTLINES FOR ECONOMIC MEASURES

Cohen-Orgad, speaking for the government, listed five economic measures he intends to implement: budget cuts; restrained public consumption; a freeze on living standards; broader based taxation; and protection for the weaker sectors of society.

He said he would strive to reduce Israel’s $5 billion foreign trade deficit by half. He announced that he has invited Histadrut Secretary General Yeruham Meshel to meet with government representatives and the private business sector to discuss cooperative measures. The talks are intended to create “social and economic calm” he said.

Cohen-Orgad said the private employers have already accepted his invitation and he had “reason to believe” the trade union leader would also accept. He expressed confidence that the public would trust his economic policies which, he said, were founded on decisions already adopted by the Shamir government.

Shamir, in his inaugural speech to the Knesset October 10, warned that the country has been living too long beyond its means and said he would institute an austerity regime until economic health is restored.

FIRST MAJOR ECONOMIC STEP

The government’s first major economic step apparently will be an attempt to restore confidence in bank shares which collapsed when investors cashed them in to buy Dollars in face of a rapidly weakening Shekel.

The Tel Aviv stock exchange has been closed for the past 10 days, mainly to prevent further erosion. When it reopens, the Treasury and the Bank of Israel expect stock transactions to inject several hundred million Dollars into the market through the sale of government-backed bank shares.

Labor Minister Aharon Uzan was reportedly the only member of the government who objects to this arrangement. Haaretz reported today that private entrepreneurs are warning that the plan would only encourage the sale of shares as long as the prices are sustained at an artificial high. A new collapse would follow, once the government withdraws its support.

According to private entrepreneurs, the majority of bank shares is held by large companies which, would in effect be receiving a government subsidy. Relatively few shares are held by the public at large, a fact that lends credence to opposition charges that the plan helps big business rather than small investors.

Nevertheless, representatives of the commercial banks and the Bank of Israel continued their deliberations over details of the plan today. The government is reported willing to guarantee the price of bank shares for a period of five years.

‘HOUSECLEANING’ OF THE TREASURY

Meanwhile, the new Finance Minister, an outspoken critic of his predecessor, has begun a “house-cleaning” of the Treasury. He has asked for the resignation of Prof. Yakir Plessner, deputy governor of the Bank of Israel who reportedly was the architect of Aridor’s economic policies. Israel Radio said today that Plessner has refused to resign and Cohen-Orgad may have to ask the Cabinet to oust him.

The Cabinet and coalition MKs are backing the Finance Minister. There have been calls for a clean sweep of the top echelon of Treasury officials who are held equally responsible with Aridor for the current economic mess.