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Economic Cutbacks and Reforms Looming in the Face of an Unexpected 19.4 Percent Hike in April’s C.o.

Stunned by an unexpected 19.4 percent rise in the April consumer price index, the political climate in Israel seemed ripe today for drastic economic cutbacks and reforms. They are expected to emerge at this Sunday’s Cabinet meeting as decisions to implement measures decided upon months ago but delayed for fear of political fallout.

Since the bad news about inflation was released yesterday, the economic ministers have been meeting and the leadership of the Labor and Likud components of the national unity coalition have been huddling separately.

Each side is seeking an economic action program acceptable to the entire Cabinet, or a substantial majority of it. In this instance, both Labor and Likud realize that bi-partisanship is essential because their constituencies will not be happy with many of the programs.

President Chaim Herzog today urged the public to work harder during the economic crisis and suggested that economists give less advice.

SITUATION IS CALLED CRITICAL

Gad Yaacobi, Minister of Economic Planning, called the situation critical. He told a meeting of the economic ministers that it was high time for a comprehensive economic program to tackle the crisis as a whole rather than trying to deal with it piecemeal. Spokesmen for both Labor and Likud seemed to agree.

What Israelis may expect from Sunday’s Cabinet meeting is larger cuts in government subsidies; new taxes to limit cash in circulation; and a major increase in the $150 per capita travel tax instituted earlier this year. Premier Shimon Peres and Finance Minister Yitzhak Modai reportedly want to raise the tax on travel abroad to $400-$500 per person.

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