The Cabinet voted today to temporarily freeze the prices of basic commodities, a move demanded by Premier Menachem Begin to “cool the economy,” but gave no indication how long it would last. Only last week the freeze was vehemently opposed by most ministers, including Finance Minister Simcha Ehrlich, because it implied an increase in price support subsidies which the Treasury can ill-afford.
Economic observers said today’s decision represented a compromise. The freeze will last for on undisclosed period of time but eventually will be replaced by a comprehensive new policy that will do away with subsidies of food and other basics. That would mean the doubling of the price of such items as bread and fuel oil. The government’s long range plan is to compensate low-income people and large families through national insurance and child benefit payments. This is in line with Likud’s fundamental economic philosophy which is that the needy consumer rather than the commodity itself should be subsidized.
It was not immediately clear whether fuel was to be included in the temporary price freeze or if the government would adjust its price upward in line with the new OPEC prices and the steady decline in the value of the IL.
EHRLICH RESIGNATION THREAT DENIED
Meanwhile, Ehrlich has flatly denied media reports that he had offered to resign because of the deteriorating economy and his differences with Begin over the price freeze. Davar reported today that Ehrlich had approached David Golan, director general of the First International Bank, to replace him. According to that report, Ehrlich would be appointed coordinating minister for economic affairs. Another report said former Commerce and Industry Minister Yigael Hurwitz was a possible candidate for Ehrlich’s job. Hurwitz resigned from the Cabinet last year in protest against the Camp David agreements but Begin reportedly has asked him to re-join the government. Ehrlich said in an interview published in Yediot Achronot today, “I did not meet anybody on this subject and did not raise any such ideas.”
Minister of Commerce and Industry Gideon Pat signed an order Frigoy obliging the manufacturers of a long list of goods to give 30 day’s notice of any intention to raise prices. Such plans could be blocked by the government and the manufacturers forced to adhere to a price ceiling.
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