Leading economists were in agreement today that immediate, drastic measures must be taken to curb soaring inflation, even if it results in a certain amount of unemployment, a dreaded condition that Israel has managed to avoid until now.
The urgency of the situation was underlined by Haim Barkai, former chairman of the Bank of Israel Advisory Board and Emanuel Sharon, until last month Director General of the Finance Ministry. Both cited the 13.3 percent cost-of-living increase reported yesterday for June, the highest ever for that month which is traditionally a period of low inflation.
The only way out of the present inflationary spiral is to slash government spending without delay and to further devalue the Shekel, the experts concurred. This will result in unemployment but with a firm hand now the economy could be rehabilitated in a year or two, they said.
NOT TOO LATE TO ACT
Barkai maintained it was not too late to act. He said that with inflation now running at an annual rate of 400 percent, Israel still is better off than Weimar Germany in 1924. In that year, the Weimar government wrote off its public debts and ceased printing money, initiating an economic recovery that lasted until the onset of the worldwide depression in 1930.
Barkai told Voice of Israel Radio that while he did not recommend that the Israeli government take similar measures, it should learn from the Weimar experience that the first step to reduce inflation is “substantive cuts” in the budget.
There will be an interim period of unemployment, the economists said. “We entered a dead end street and we must back up. When you face a situation like this, then some unpleasant things happen, Barkai added.
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