There is growing talk of bringing Knesset elections forward to the final quarter of 2012 instead of in 2013, but is this good news for the economy?
Prof. Momi Dahan, head of the Federmann School of Public Policy at the Hebrew University of Jerusalem and senior researcher at The Israel Democracy Institute thinks that election economics at the current juncture is less damaging compared with previous decades. He said, "Election economics, in the last elections for sure, are more passive than active. That is to say not taking decisions or postponing them. This is for two reasons. The first is that it is legally more difficult to conduct active election economics while the Israeli public is more mature and understands that a politician who carries out election economics is an irresponsible politician. The public understands that it will pay the price in the end. This is a major factor in restraining election economics."
HSBC and Leader Holdings and Investments Ltd. (TASE: LDER) chief economist Jonathan Katz who previously served as budget coordinator at the Ministry of Finance paints a more complex picture. He said, "Earlier elections will pull in two contradictory directions - one more positive and the other negative and more uncertain. On the positive side, elections and postponing approval of the state budget until 2013 will freeze a rise in expenditure, that is to say, no additions neither Trajtenberg or to the budget. Here bringing the elections forward has a restraining effect. On the other hand reforms like promoting structural changes, competitiveness, applying conclusions of committees - all these will be frozen. However, in my opinion the advantages outweigh the disadvantages."
Harel Insurance Investments and Financial Services Ltd. (TASE: HARL) chief economist Dr. Michael Sarel said, "Even if the government wants election economics it hasn't the means to do so. The forecast for the deficit has recently been revised upwards so even without election economics and without political influence, we already see a growth in the budget deficit both this year and in 2013. The market won't allow election economics. It won't wait and will respond by raising returns on long-term government bonds."
Published by Globes, Israel business news - www.globes-online.com - on April 29, 2012
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