Finance Minister Yitzhak Modai confirmed today long standing rumors that the government will take over running the economy unilaterally after the current wage-price freeze package deal officially expires next August. Alternative economic measures will be needed, Modai said in an Army Radio interview.
Many Israelis, including leading economists, say the package deal is already, for all practical purposes, dead. It is the second wage-price freeze package worked out between the government, Histadrut and the employers and manufacturers associations. The first took effect last November and expired in February. The current measures were instituted last March. The aim of both freeze packages was to curb a three-digit annual inflation rate.
But inflation is expected to soar by 25 percent when this month’s figures are in and the general economy continues to deteriorate. Treasury officials have been holding late night consultations with economic experts from the public sector and academia, giving rise to rumors that the government is preparing a new, large scale economic program to cope with the situation.
FURTHER BUDGET CUTS EXPECTED
Once the package deal period is over, “we shall not be able to leave things in the air, “Modai said. When administrative controls over prices, a key component of the package deal, are lifted, he said, the government will have to use its prerogatives to run the economy unilaterally. One measure that can be expected is further cuts in the national budget, Modai said, noting that three months into the current fiscal year “we have already deviated from the original budget.”
Modai said he was trying to run an economic policy as he saw fit but was exhausting his powers as Finance Minister because of lack of support from his fellow ministers. He has complained frequently in recent months that he has been unable to institute necessary measures to end the present crisis because he was blocked in the Cabinet.
He admitted that Premier Shimon Peres usually backed his policies. But sometimes he compromised and there is no room for compromise in the present situation, Modai said.
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