New Economic Plan Under Heavy Fire

The Finance Ministry’s new economic plan is facing mounting opposition in trade union circles, sharp criticism in the business community and a divided Cabinet. A rancorous 10-hour Cabinet discussion Sunday ended inconclusively and the Cabinet was scheduled to meet late Monday to continue the debate.

The Cabinet debate Sunday confirmed that both the Labor Party and Likud are deeply divided internally over the plan. Nevertheless, Premier Yitzhak Shamir and key economic officials expressed confidence that the plan will eventually be approved by the government, with certain changes, and would then have to be accepted by Histadrut and the Manufacturers Association.

Shamir pointed out that the plan, largely the work of Finance Minister Moshe Nissim and Bank of Israel Governor Michael Bruno, was not new because it is actually the second phase of the economic recovery plan instituted 18 months ago by the Labor-Likud unity coalition government.

There is no choice but to continue because there are no alternatives, except a return to the economy of inflation, Shamir said on television Sunday night. Earlier, he told reporters that the controversy was not along party lines and the plan would be approved by the Cabinet “within a few days.”

Its main features are tax reform, budget cuts and restructuring of the capital market. Bruno told the Cabinet Sunday that without the budget cuts, the other measures could not be implemented. He stressed the need for consensus between the main parties — government, labor and management.

LABOR DISTRESSED BY SEVERAL FEATURES

Labor is distressed by several features of the plan. The head of the teachers’ union said Monday that the proposed levy on education would harm chiefly the low and middle income groups. He said the union would declare a work dispute with the government, giving it the right to call a strike in two weeks. The union represents primary and junior high school teachers.

In Histadrut there were rumblings of a general strike if the plan is implemented without changes. A spokesperson said the trade union federation would take “significant measures,” waiving a two-week “cooling-off” period.

Labor Party Ministers urged that no vote be taken on the plan before consultations with Histadrut and the Manufacturers Association. Several Ministers proposed setting up committees to deal with each of the major issues.

The Manufacturers Association, representing employers, demanded Sunday that the final version of the plan be worked out in consultation with them.

MINISTERS DIFFER ON PLAN

At Sunday’s Cabinet session, Defense Minister Yitzhak Rabin continued to denounce proposed cuts in the defense budget. He told senior Treasury officials present, “You shouldn’t talk about things you do not understand.” Rabin has warned that the defense cuts could “ruin the army.”

Deputy Premier and Housing Minister David Levy of Likud spoke strongly against the plan, as did Minister of Commerce and Industry Ariel Sharon. Levy, who claims as his constituency the low-income Sephardi community, denounced the plan for not doing “social justice.”

He stalked out of the Cabinet room after an angry altercation with his Likud-Herut colleague, Minister Without Portfolio Moshe Arens. But their verbal clash had less to do with the economic plan than with their personal rivalry. Both are considered front-runners to succeed Shamir as Likud leader.