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Subsidy Slash Increases Prices by 50 Percent

August 13, 1979
See Original Daily Bulletin From This Date

The prices of basic foodstuffs rose by an average of 50 percent at midnight Saturday as the government slashed its subsidies on these Items. Finance Minister Simcha Ehrlich said today there would be no further subsidy slashes this year, but there would be two more within the next 12 to 15 months and they would bring the government to its desired goal: stabilizing subsidies at no more than 30 percent of the cost of these basic items.

The government announced immediate relief payments for the poorest sections of the populace those living on welfare and national insurance payments. Ehrlich also said there would also be a special cost-of-living increment paid to all salaried and wage-earning people next month in advance of the scheduled October payment.

But Histadrut has called for a nationwide two-hour protest strike tomorrow morning against the subsidy slashes. Histadrut Secretary General Yeruham Meshel claimed that the new economic steps would turn hundreds of thousands of workers into welfare cases because they would no longer be able to make ends meet.


The government’s move was welcomed in economic circles and by the Manufacturers Association-on condition that it was to be part of a broader program to prune the national budget and thereby avoid printing money which has no cover Ehrlich pledged that it indeed was. He told an interviewer today that the Cabinet would shortly be presented with Treasury plans for an additional cut of IL 3 billion in the state budget (although economists have been urging a slash of IL 4 or 5 billion).

Ehrlich also revealed that Premier Menachem Begin proposed to sell government-owned land to private developers and thereby achieve two goals: raise funds for the public coffers and reduce the spiralling price of apartments. Ehrlich said the Premier’s proposal would come this week or next.

The Finance Minister explained that the midnight subsidy slash was in fact a followup of the infamous “decide not to decide” nocturnal Cabinet meeting of nearly a month ago. That meeting, Ehrlich said, while it had decided not to remove all subsidies at once, had empowered a ministerial committee to embark upon a phased cutback of subsidies-of which last night’s action was the first phase.

Some examples of the price hikes are: a “regular” brown bread, up from IL 2,59 to IL 3.50; a challa, from IL 3 to IL 4.80; sliced white bread, from IL 4.50 to IL 7.80; a litre of milk, from IL 5.10 to IL 7.60; a bottle of oil, from IL 8.30 to IL 12.50; cottage cheese, from IL 5.30 to IL 8.5; and frozen chicken, from IL 40 per kilo to IL 58. Treasury experts said the rises would produce a 3.5 percent increase in the cost of living. But independent experts put the figure considerably higher.

A television team worked out that the subsidy slashes would cost an average family, which buys one bread, one chicken, one cottage cheese and one litre of milk each day IL 900 a month.

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