The Economic Situation in Israel
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The Economic Situation in Israel

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Senior ministers of the Labor Party and Likud met at Premier Shimon Peres’ office Sunday night to grapple with the growing split between the coalition partners over which course the economy should take in the months ahead. A similar meeting last Friday, which lasted 41/2 hours, failed to bridge the differences.

Peres proposed, and Likud rejected, the creation of a five-man Cabinet committee to supervise a national investment drive in industry and agriculture. It is Peres’ firm belief that with the monthly inflation rate now under two percent, the time has come to stimulate economic growth, expand employment and help distressed areas with investments.

Finance Minister Yitzhak Modai (Likud-Liberal) insists with equal vigor that the austerity economic program begun last July must remain in force lest its achievements to date fall apart. Likud sources saw Peres’ proposal as a deliberate effort to whittle away at the Finance Minister’s authority.

Likud politicians openly accuse Labor of trying to precipitate a government crisis over the economy as a pretext for breaking up the unity coalition before the rotation of power.

Under the coalition agreement, Peres must turn over the Premiership to Foreign Minister Yitzhak Shamir, the Likud leader, next October 13. The coalition government would complete its statutory five year term under Likud leadership.


Energy Minister Moshe Shahal, a Laborite, added fuel to the fire Sunday evening when he announced a scheme to channel investments into development, towns, some of which have been hard hit by the austerity program. Shahal declared that if Likud turns down such ideas, the unity government should dissolve itself and call for early elections.

Likud appears determined, however, to avoid a coalition crisis. It does not want to be provoked into a public dispute with Labor over the economy for fear that the worse the political tension, the better the chances that the unity government will fall before the rotation of power.

Likud sources were quoted as saying Sunday that if the present fight over the economy is resolved, Labor would be hard-pressed to find a credible pretext to bring down the coalition.

But the battle has already erupted in the Knesset. Mutual attacks were hurled on February 17 at the weekly meetings of the Labor and Likud Knesset caucuses. Haim Kaufman, coalition chairman, charged that Labor attacks on Modai’s economic policies were part of a systematic effort to break up the unity government. Kaufman said nobody opposed economic growth but the time is not ripe for a change of policy. The demands by Labor ministers for growth is pure electioneering, he said.

But Labor MK Haim Romon, who heads his party’s delegation in the Knesset Finance Committee, contended that the money for growth is available. He said the high rate of unemployment in development towns called for action now. He charged that Modai is indifferent to the problem of joblessness.

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