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Behind the Headlines: Sharp Price Increases Come As Shock to Already Burdened Israeli Consumer

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Israelis shopping for food were shocked and angered Tuesday morning to find a standard loaf of dark bread costing 55 cents and a standard loaf of white at 60 cents, overnight increases of 29 and 33 percent respectively.

The price hikes on those and many other basic consumer products and services took effect at midnight Monday.

They are a consequence of Finance Minister Yitzhak Moda’i’s crash program to reduce government subsidies, which have kept marketbasket prices relatively low and stable until now.

Moda’i introduced a $1.25 billion supplemental budget Tuesday. It contains a $235.5 million cut in regular government expenditures in order to finance the absorption of tens of thousands of immigrants from the Soviet Union this year.

Moda’i told the Knesset Social Welfare Committee that only $62.5 million, less than a quarter of the total cuts, would come from ministerial budgets that benefit low-income families.

Moreover, even though the bread subsidies have been abolished, the price of a loaf will remain under government control.

But that is hardly likely to mollify consumers, for whom the higher prices come at a time of economic hardship.

Unemployment is running at close to 10 percent of the work force. And at least 1,500 Israeli families, rendered homeless by soaring rents, are living in tent cities that have sprung up all over the country.

RESENTMENT TOWARD THE NEWCOMERS

They feel resentment toward the Soviet newcomers, whose housing subsidies are responsible for rent hikes that many Israeli wage-earners simply cannot afford.

A spokesman for the tent-dwellers said, “While we welcome the newcomers, their arrival should not drive up our rental costs and should not send our food prices rocketing.”

The homeless also complained that food prices are going up at a time when political parties and Knesset members are awarding themselves higher state allocations to rebuild or redecorate the offices of newly appointed ministers.

The subsidies for fresh and frozen chickens, a staple of the Israeli working class diet, have been reduced by 7 percent. As a result, prices have gone up by 6 and 10 percent respectively.

The price of margarine rose 3 percent Tuesday. Price hikes for eggs, milk, other basic foods and public transportation will be announced shortly.

Moda’i also plans to reduce child allowances paid by the National Insurance Institute. But he had to back off from plans for a shorter school day, after Education Minister Zevulun Hammer objected vehemently.

Other plans by the Treasury include a 1.7 percent across-the-board budget reduction that will affect all ministries and save about $80 million; a reduction in the number of families eligible for second-child allowances from the National Insurance Institute, expected to save $45 million; and a $500 reduction in the “absorption basket” for new immigrants.

In addition, the Treasury expects to save $15 million a year by shifting security costs for E1 A1 Airlines from the government to the airline itself.

Histadrut, Israel’s labor federation, is sharply critical of the finance minister’s austerity program.

Haim Haberfeld, head of its Trades Union Department, complained that the government was “taking away with the right hand,” by way of reduced subsidies, “what it was supposedly giving with the left,” through tax reforms.

The Bank of Israel, Israel’s central bank, also criticized the Treasury’s moves, which it described as a “patchwork, piecemeal” attack, rather than the comprehensive economic plan needed to cope with current social problems as well as immigrant absorption.

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