Knesset Approves Legislation to Devalue Pound; Criticism Widespread

The Knesset approved at 1 a.m. this morning legislation embodying the emergency regulations approved by the Cabinet in connection with Israel’s devaluation of the pound and accompanying economic measures. The regulations impose price controls and excise taxes on goods sold at higher prices without authorization, and set up a price control bureau in the Trade and Industry Ministry. The vote on the second reading of the measures came after five hours of sometimes sharp debate, a long meeting of the Knesset Finance Committee and another five-hour Knesset session in which members voted down all amendments proposed by members except one. The exception was a clause incorporated in the new laws requiring that the price control bureau must act within two months on every application for a price increase and that failure to meet that deadline will be held to be approval of the request. The Cabinet was vigorously criticized by leaders of the Leftist Mapam and of the Histadrut, Israel’s Labor Federation, who are members of the Knesset. They challenged last night an estimate by the Finance Ministry that the increase in prices of basis foodstuffs would cost even a large family no more than 10 pounds more per month and they reiterated demands that those price boosts be rescinded.

Criticism from the center and right of center opposition deputies was made by their main speaker, Yosef Saphir of the rightist Gahal alignment, a former Trade and Industry Minister. He said Gahal opposed the devaluation because it was “doomed to failure.” He insisted that a devaluation, to be successful, must be “cruel” and cut consumption in all sectors except for the poor. But such a retrenchment, he asserted, was not feasible under current Israeli conditions of full employment and unreduced government spending. The Labor alignment, the State List and Agudat Israel voted for the implementing legislation. The Free Center deputies abstained. Other opposition factions on both sides of the house voted against the legislation. Officials said today that heavy purchases of staple products, mainly electrical appliances and used cars, was continuing on the third day since devaluation. Some prices were marked up, others were unchanged, and shops selling at pre-devaluation prices heavily advertised that fact. Meanwhile Israel’s reserve bank, the Bank of Israel, announced a new record interim rate for deposits by banks which top the liquidity rate laid down in the law. The new rate of 16 percent will be paid to commercial banks as a special reward for depositing more of their assets with the central bank than is legally required.