The governor of the Bank of Israel warned here yesterday that Israelis will have to accept a freeze on wages for at least the next two years in order to protect the national economy from inflation stemming primarily from increased security needs. David Horowitz, who heads the bank that is Israel’s counterpart of the United States Federal Reserve Bank, said he prefers a wage freeze to increased taxes. He said the country’s productivity is rising at a “respectable pace” but that it is not sufficient to cover the defense costs that are Israel’s major economic commitment. Mr. Horowitz is the third high Israel official to warn in recent days that the country faces a period of belt-tightening. Similar statements were made last week by Defense Minister Moshe Dayan and only yesterday by Minister of Information Israel Galilee.
Mr. Horowitz had praise for the way the Government handled fiscal difficulties of 1967. He said that as a result of sound financial decisions, the economy enjoyed comparative stability through the end of last year. Since then, however, currency and other mediums of payment in circulation have risen and the economy has continued to expand despite deflationary measures. He said a wage freeze would slow down this trend.
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