Government Trying to Work out Policy of State Subsidies

The government announced today that it would try to work out a long-term policy of state subsidies for basic commodities and other consumer items. It said it intends to link subsidies to the general cost of living index instead of increasing or cutting them on an ad hoc basis as has been the case heretofore.

The announcement was made in an attempt to mollify critics on both left and right who have denounced the IL 400 million subsidy cuts recommended by the ministerial economic committee today in face of strong opposition from Histadrut.

The Histadrut Central Committee convened in emergency session in Tel Aviv today.

The government’s subsidy policy was assailed by Likud, the leftist Moked and the Rakah-Communist Party. It was also sharply criticized by Histadrut Secretary General Yeruham Meshel who characterized the decision as hasty. The Central Committee called on the government to reverse it.

The reduction will send the prices of 14 basic foodstuffs up by an average of 20 percent. The cost of public transportation will increase by the same amount in two weeks and an immediate hike is expected in the cost of fuel. The government communique said that the Finance Minister would consult with Police Minister Shlomo Hillel, chairman of the ministerial economic committee, on measures to compensate the needy.

Economists, meanwhile, estimate that today’s decision will cause a 2.5-3 percent rise in the cost of living index. Israeli wage-earners are compensated semi-annually for COL hikes. A 12 percent allowance was paid only last month for price increases that took effect earlier this year. The next COL allowances are six months off but when they are paid, they will only feed the inflationary spiral, economists said.