Finance Minister Levi Eshkol today assured the Knesset, Israel’s Parliament, that the implementation of Israel’s new economic policy would be carried out “with the least hardship” on Israel’s population. The Government launched the new economic program last Friday with the announcement of the devaluation of the Israel pound from 1.8 to the dollar, to three to the dollar.
In line with the Government’s efforts to ease the burden of the change in the foreign currency rate, Mr. Eshlkol told the Knesset today that holders of loans and mortgages linked to the dollar exchange rate would have their periods of repayment extended by one-third to compensate for the increase in the Israel-pound value of such obligations. He said other concessions were planned.
A spokesman for the Investment Authority said today that enterprises approved by the Government will retain the privileges they now enjoy. These include exemption from customs duties on imported equipment and raw materials for an initial period and from income taxes and local rates for the first five years of operation of the enterprise. Foreign investors in Israel were visibly gratified today at the sharp increase in the rate of exchange for their capital transfers.
Budgets of the Jewish Agency and other institutions receiving income from abroad are now being revised upward following the change in the foreign currency rate. Of the Agency’s 272, 000, 000-pound budget approved last month, 119, 000, 000 pounds were expected from revenues of the United Jewish Appeal and other campaigns abroad.
LARGE INDUSTRIAL FIRMS ANNOUNCE THEY WILL NOT INCREASE PRICES
A number of large industrial firms announced today that they will not increase prices on their products, declaring they wish to help the Government attain the goals comprising the motivation of the new policy.
Under the new regulations for holders of foreign-currency accounts, only the recipients of restitution and compensation paid to Nazi persecutees will be entitled to hold their foreign currency in accounts enjoying special privileges. All other recipients of foreign currency will have their money transferred to ordinary foreign-currency accounts, but the interest rate will be raised to seven percent if deposited for a year–and by lesser increases for lesser periods.
Banking and financial circles in Israel stated today that the Government’s announcement of a new economic policy is “welcome” at least as a change from the uncertainty that has prevailed in recent months in regard to a possible move toward devaluation of the pound. Now that the exchange rate has been fixed and unified, these circles held, the step should help increase investments in Israel.
Bankers feel that the plan will achieve its goal if a general price increase can be averted or at least postponed, and if the price increases can be held to small sums. Financial experts here feel that Israel can now put itself in a good position to compete with the European markets, and actually participate in world markets. However, the fiscal circles felt, the real effect depends on what the public reaction will be to some of the steps announced by Mr. Eshkol. These include lowering the customs barriers and import duties, linking any wage increases to an increase in the national production, abolishing export premiums, and putting Israel’s industry on a competitive basis.
MANUFACTURERS ASSOCIATION URGES ‘TOTAL FREEZE’ OF WAGES
M. Weinglass, chairman of the Manufacturers Association, declared last night, after a special meeting of the group’s executive committee, that devaluation would be beneficial only if it is followed by a “total freeze” of wages and production costs. The Merchants’ Association expressed anxiety over the effect of the new policy on small merchants “who are uncertain as to the possibility of renewing their stocks.”
Hisadrut, the Israel Federation of Labor, was considering today a discussion with employers soon about a cost-of-living allowance in union contracts. There is a clause in the agreement between the Manufacturers Association and the trade union, providing for such a discussion next July if the pound should be devalued.
Political activity was rife among all parties in Israel today as a result of the announcement of the new policy. The Mapam Party central committee, meeting last night at Kibbutz Merhavia, declared itself staunchly opposed to the new policy, announcing it will move in the Knesset for a motion of non-confidence in the Government.
Mapam leaders were in touch with leaders of Ahdut Ahodah, another left-wing party which, unlike Mapam, is a member of the coalition Government. It is understood that at the special Cabinet meeting, where the new policy was voted, Ahdut Avodah abstained on the issue. Ahdut was concerned about the effects of the new policy on wage earners, and there were some calls inside that party that it leave the coalition.
The National Religious Party approved the new policy. The Liberal Party not only approved the policy but called it “a sound move toward improving the State’s economy.” Both extreme parties, the right-wing Herut and the Communists, will request full-scale debate of the new policy in the Knesset.
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