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Differences Within Israel Cabinet on Austerity Program Widen

August 19, 1966
See Original Daily Bulletin From This Date

Fissions within Premier Levi Eshkol’s Mapai-led Government widened today over the three-year austerity program proposed by Finance Minister Pinhas Sapir to cope with Israel’s mounting inflation and growing international trade imbalance.

The Premier invited leaders of the Alignment of his Mapai Party and Achdut Avodah to a “summit conference” tomorrow to iron out differences over the plan. It was indicated he hoped to present a united Alignment stand on the plan to Mapam, which has expressed strong reservations on many aspects of the program, when he meets with Mapam leaders next week.

The growing differences involve not only conflicts between Mapai and Achdut Avodah, but also arguments within Mapai factions. One of the main lines of division involves the question of whether the country should undergo Sapir’s tax and price freeze plan or a new compulsory loan as the chief weapon in the fight against the nation’s economic squeeze.

Mapam leaders want not only the new loan but also a boost in income taxes and a lowering of the level for special higher taxes on large income. Mapai willingness to consider such concessions, however, evoked growing opposition from the National Religious Party and the Independent Liberals. Leaders of those groups expressed dissatisfaction today both over such proposed concessions to the leftist parties and over the Premier’s “non-consultation” with them on the Sapir program.


Basically, the Sapir plan calls for a freeze on wages and dividends, higher taxes, and incentives to export industries plus penalties for inefficient production. The leftist groups contend the plan falls too heavily on the wage earner. The National Religious Party and the Independent Liberals said that neither the compulsory loan nor the additional income taxes should be effected. They called for cutting costs and greater efficiency as the basic answer to Israel’s economic troubles.

Sources close to the Premier expressed hope today that a plan could be presented to the Cabinet for discussion before the end of this month but it was considered practically certain that the Cabinet would not deal with economic issues at the next session on Sunday.

New evidence of Israel’s economic problems emerged today from a report by the Central Bureau of Statistics that Israel’s trade deficit grew by $8, 000, 000 during the first three months of 1966. The bureau figures showed that while visible exports grew by $21, 000, 000 to $150, 000, 000 in that period, the Government increased its outlays on services from $25, 000, 000 to $42, 000, 000.

Israel’s foreign currency reserves were $697, 000, 000 on April 1 this year compared with $752, 000, 000 last year. While the drop was not a large one, experts said it was nevertheless serious.

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