Minister of Finance Silvan Shalom long ago became everyone’s punching bag, with economic commentators and government ministers leading the assault. The political power Shalom accumulated and his position as the second most important figure in the Likud after Prime Minister Ariel Sharon have irritated many.
Shalom’s main problem is that the few things he has done right in the past eight months, and there have not been many, were done by brute force, and were accompanied by the public humiliation of Ministry of Finance officials, professors, and politicians. For example, when one Ministry of Finance official, who has since resigned, tried to explain what should be done, Shalom denigrated him by saying, “No one understands your explanations.”
Shalom’s problem is not his short fuse, but his hesitation in applying the necessary economic measures, and his devotion to political considerations.
In the first month of his term, Shalom should have announced that there would be no politically motivated distribution of funds. With the guns thundering and Israel facing a prolonged confrontation, this is no time to distribute money. He also missed the chance, perhaps the last chance, to implement a true tax reform, with or without Avi Ben-Bassat. Past experience with the Ministry of Finance shows that whatever is not accomplished in the first eight months cannot be done in a full eight-year term.
There is nothing wrong with replacing senior Ministry of Finance officials. Some of them in any case fill positions in which they must have the minister’s trust. A little fresh air doesn’t hurt, either. Almost all of Shalom appointments, however, have been tainted by political considerations.
For the past six months, the Ministry of Finance divisions, which are paying the price of Shalom's hesitation as he searches for cronies, have been mourning the absence of professional leaders, as the state revenue commissioner and the budget division director positions have gone unfilled.
The key question that should concern the country is whether the people appointed to fill these positions would have abetted the budget fraud – basing the 2002 budget on 4% growth and a real 4.5% rise in tax revenues. Shalom derives his stamp of approval for this unrealistic budget from Ohad Marani, his director general, and some of the other past and present ministry officials.
The source of irresponsibility lies in the failure, for the third consecutive year to state the whole truth about Israel’s economic situation and the absolute uncertainty regarding economic policy for 2002,. Postponing economic decisions to 2003, an election year, is a sure recipe for a crisis on the scale of the 1983 bank shares collapse and the 1985 hyperinflation fiasco.
Published by Israel's Business Arena on November 7, 2001