Proposals Pending for Sweeping Cuts in Government Expenditures

Finance Minister Yitzhak Modai promised yesterday to present the Cabinet, within two weeks, with proposals for sweeping cuts in government expenditures that will eliminate entire areas of government activities.

His pledge, to the Knesset Finance Committee, was welcomed by economic experts who have insisted all along that Israelis will have to face further deep and painful retrenchment if the country’s grave economic crisis is to be solved. They have warned that without drastic fiscal measures during the “breathing space” allowed by the three-month wage-price-tax freeze package that took effect this week, the economic recovery program cannot succeed.

Modai’s promise was greeted with skepticism by at least one member of the Finance Committee, former Finance Minister Yoram Aridor who charged that earlier Cabinet decisions to slash the budget have never been implemented.

PRICE FREEZE BEDEVILED BY UNCERTAINTY

The price freeze, meanwhile, was bedeviled by uncertainty and confusion. It had hardly taken effect when the Ministry of Commerce and Industry was forced to publish a revised list of the maximum prices allowable on some 400 household staples which are said to account for about 80 percent of the average family’s monthly budget.

The original price list, published Tuesday, was assailed by retailers and consumers alike for alleged errors. In some cases, retailers claimed they were already selling many items at lower prices than those on the government’s list.

Consumers protested that the frozen price of many goods was much too high while merchants complained that others were too low and would cause them undue hardship. The discrepancies apparently were corrected in the revised price list published yesterday.

Justice Minister Moshe Nissim, acting Minister of Commerce and Industry in the absence of Ariel Sharon who is in the U.S., is furious with the television media for having reported Tuesday night that an early price list prepared by the government was “destroyed” at the demand of manufacturers who threatened to walk out of the price freeze agreement. Nissim called the report blatantly false, demanded a retraction from the media and threatened legal action if it was not forthcoming.

CRITICISM OF GOVERNMENT’S RETREAT

There has been much criticism as well of the government’s apparent retreat under pressure from Histadrut last Sunday over the price of fuel and other subsidized items. Modai had hoped to exclude those items from the price freeze and allow them to rise, albeit slowly and under strict supervision by the Treasury. But Histadrut Secretary General Yisrael Kesar accused the government of reneging on the original freeze package agreement which he said applied to “all” items.

The situation is still not clear. Energy Minister Moshe Shahal, a Laborite, said yesterday that there would be no rise in the price of fuel this month but refused to commit himself for December. He maintained that the government had the right to raise the price of items it subsidizes, contending that strictly speaking this was not an increase but an “adjustment” to keep such items in line with the falling value of the Shekel against foreign currencies.

ANOTHER ‘ADJUSTMENT’ ANNOUNCED

The Treasury announced another “adjustment” yesterday. It will apply the freeze to the price of imported goods, originally excluded, although not directly. This means that import duties and taxes will be frozen at the rate of 527 Shekels to $1. The Shekel was pegged at that rate for the duration of the freeze as it applies to local prices quoted in Dollars.

Importers will thus pay lower taxes on the goods they import during the freeze. But they will continue to pay “real” Dollars for their imports and this, it is said, will be the importers’ contribution or “sacrifice” to the freeze package.

The Treasury acted to forestall a trend among importers to slow their business to a crawl on grounds that they cannot realize a profit when they must pay for their foreign goods at prevailing market prices but can sell them in Israel only at the frozen price.

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