Soaring Unemployment Presents a Dilemma for Israeli Leaders

The Israeli government is facing the tough choice of risking inflation to create jobs for a growing army of unemployed or doing nothing in the hope that the economy will improve by itself and jobs somehow will materialize.

The Cabinet discussed that economic dilemma for six hours Sunday without agreeing on effective measures.

The ministers promised themselves to tackle the problem again at their next session. But the do-nothing camp has prevailed so far.

Moshe Nissim, the minister of industry and trade, insists the economy is on the right track and that growth is just around the corner, with jobs for all.

The stark fact is that there are 145,000 jobless in Israel now, and predictions are that the figure will rise to 200,000 by the end of the year and 250,000 in 1992.

In other words, the current 11 percent unemployment rate, which is already gigantic by Israel’s standards, is likely to reach 12.5 percent next year.

In development towns where immigrants are settled, unemployment is running at 20 percent and easily tops that in some Israeli Arab villages.

Suheil Diab, deputy mayor of Nazareth, estimated this week that 28 percent of Israeli Arabs are unemployed, though Arabs account for 18 percent of the total population.

FEAR OF TRIPLE-DIGIT INFLATION

Money is so tight that even the housing industry, a major employer and one of the few enterprises to derive immediate benefit from large-scale immigration, has stalled after working at full steam for the past 18 months.

Housing Minister Ariel Sharon reported this week that many projects had to be halted because the Treasury would not provide the funds promised to contractors. More builders were thrown out of work.

If the government acts to create jobs, as many are urging, it will have to expand the national budget, which would invite a new inflationary spiral. Inflation this year is running at an annual rate of 20 percent.

Politicians and the public remember Israel had triple-digit inflation not too many years ago. They fear that any tinkering with the budget that requires printing more money could bring back those conditions.

But the alternative could be hungry job-seekers taking to the streets.

Menachem Porush, the deputy minister of labor and welfare, told the Cabinet that starving children have been seen scavenging garbage cans in the development town of Netivot.

The only one of his proposals that the Cabinet accepted was to increase the number of unemployed eligible for retraining. At best, it would provide a few thousand jobs when tens of thousands are needed.

Mayor Shlomo Ben-Lulu of Beit She’an, a town ravaged by unemployment, warned pointedly that small measures will yield small results.

Many believe a massive restructuring of the national economy and drastic budgetary changes are necessary to cope with the situation. Otherwise, the nation may find itself gripped simultaneously by high inflation and high unemployment, a sure invitation to public disorder.

But the government at present is so heavily occupied with political problems it is finding little time to cope with economic and social challenges.

The looming unemployment crisis has a strong bearing on the political situation.

With 145,000 Israelis looking for jobs and the likelihood that number will double before the end of next year, Israel’s need for $10 billion in U.S.-guaranteed loans has become desperate.

Such circumstances make it more difficult than ever for Prime Minister Yitzhak Shamir to withstand U.S. pressures on issues related to the peace process.

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