U.S. Inflation Costing Israel Heavily, Sapir Says Wants to Abolish Retroactive Payments of Wage Incr
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U.S. Inflation Costing Israel Heavily, Sapir Says Wants to Abolish Retroactive Payments of Wage Incr

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Finance Minister Pinhas Sapir told the Knesset Finance Committee today that recent price increases in the United States would cost the Israel government $250 million more this year than last in purchase of such basic foodstuffs as wheat and animal fodder He made the statement in a report on his visit to the United States last month.

He also said he had learned that nowhere in the U.S. or Europe did the concept of retroactive wage agreements exist. (American sources pointed out that it was a common practice in labor agreements in the U.S. to apply provisions of new agreements, approved after expiration of prior pacts, retroactively to the date of the expiration of the prior contracts.)

Sapir said it was “quite common” for wage agreements in Israel to be signed 12 to 18 months after they were supposed to become effective, forcing employers to pay “massive” retroactive wage bills He said he would propose to the Cabinet soon legislation to end that practice in Israel


Sapir said this would force employers and unions to sign agreements on time and avoid the “phenomenon” of one group of workers holding out until they could see what another group had been able to gain before themselves agreeing to a new pact. He said he hoped that his proposal would be accepted and that new wage pacts for 1974-75 would be signed “on time” He said retroactive wage agreements was one of the main causes of inflation in Israel. He listed as other causes government subsidies for basic commodities, price rises abroad and construction which he called “inflational dynamite.”

Sapir used the term “jihad”–Arabic for a holy war–today to describe criticisms voiced by the Bank of Israel and the Israeli press against the government’s 90-day price freeze.

Speaking at a Ministerial economic committee meeting, he said the criticisms surpassed “even” that of the political opposition. He indicated particular annoyance over the fact that the criticisms were voiced while he was out of Israel on a visit to the U.S.

He denied Bank of Israel reports that the government had poured into the economy some three quarters of a billion pounds in recent months. He conceded that the government did “take a loan” from the Bank of Israel of that size but declared that most of the money was spent in foreign currency transactions and not in the local market.

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