Shultz Praises Israel’s Efforts to Restore Its Economic Stability
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Shultz Praises Israel’s Efforts to Restore Its Economic Stability

Secretary of State George Shultz and Israeli Finance Minister Yitzhak Modai answered questions from reporters following the two officials’ hour-long meeting at the State Department on Friday, and Shultz appeared annoyed toward the end of the press conference that there had been no questions on economics.

The Secretary, who had headed the Office of Management and Budget and was Secretary of Labor in the Nixon Administration, noted that “it used to be that I thought economics was important.” He added, “It’s a new day.”

After all, as Shultz pointed out, he had just announced that Israel is to receive immediately half of the $750 million in supplementary economic aid for the 1985 fiscal year. He also praised Premier Shimon Peres, Modai and their Cabinet colleagues by expressing his “admiration” for the steps they have taken in Israel’s austerity program.

“It is quite apparent that they have taken strong and necessary measures which I believe as they are fully implemented, will do a great deal to return the economy of Israel to the kind of stability and set the groundwork for prosperity that is perfectly capable” of taking place in Israel, Shultz said.

He said the supplementary appropriation is “designed to be helpful at a time when the government of Israel is taking decisive and difficult measures to help tide over in that period so that the measures will have a chance to operate in the fullest way.”

He said the U.S. will work with Israel for long-term economic gains “for I’m sure that’s when the real pay-off comes in the growth and economic prosperity.”


Modai, thanking Shultz, President Reagan and Congress, said Israel’s measures are designed to put his country back on “our own feet.” Later, speaking to reporters from the Jewish Telegraphic Agency and The Washington Jewish Week at the Israel Embassy, Modai said there was still “a lot to be done” in order to stabilize the Israeli economy and begin a period of growth.

Modai conceded that the U.S. was correct earlier this year in not being pleased by the Israel government’s economic proposals “because we did not have a comprehensive plan.” But, he added, “Now they are very pleased with the plan and its implementation up to this stage.”

As outlined by Modai, the plan calls for cutting the rate of inflation and eventually eliminating it, maintaining Israel’s foreign currency reserves at an acceptable level and stabilizing the Shekel.

Modai stressed that the program is being implemented with the consensus of the Histadrut and business organizations. He also maintained it has the support of the public in spite of the cuts in subsidies, the reduction of government employes, higher taxes on luxury items and the travel tax which, he said, reduced by half the number of Israelis who went abroad this summer as compared to the summer of 1984.

Modai said Israel has just about reached its goal for the current fiscal year which began April 1 of bringing the rate of unemployment to 7.4 percent or 92,000 jobless. He said the aim is to reduce unemployment in the next fiscal year.

The Finance Minister said he did not believe higher unemployment would contribute to social unrest in Israel. But he conceded it might increase the number of Israelis leaving the country. He said this happened in 1980, the last time unemployment rose, but “after the situation improved, many of them came back.”

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