Minister of Finance Benjamin Netanyahu appeared this evening at the closing session of the Globes Israel Business Conference 2003. He opened his remarks by saying that Israel was undergoing deep economic change, but that he did not underestimate the difficulty facing Israel's people.
As soon as he began to speak, Netanyahu was interrupted by demonstrators who shouted at the conference participants "You are making two states, one for the poor and one for the rich" and "You paid a thousand shekels to be here while people have nothing to eat." A few minutes later the demonstrators were ejected, and Netanyahu even complimented them on their timing and initiative.
Resuming his speech, Netanyahu said it was true that change was difficult, but that the problem was to change perceptions. "People think it's a battle of interests or a matter of economic crises, but the hard thing is to change diskette.
"The notion that you can have social policy in isolation from economic policy is impossible - there's no such animal. You can't move the social wheel without the economic wheel. The cogs of these wheels are meshed together, but they have a certain order. "
Netanyahu said that to halt economic decline it was necessary to reduce the public sector while strengthening the business sector. The first stage of his economic plan, he said, was to halt the slide. The second stage, the current one, is that of reform. The third stage, which we have yet to reach, will be growth. Netanyahu thanked Prime Minister Ariel Sharon and the many MKs and ministers who had backed his reforms. He cited as the government's achievements cuts in government spending, public sector wage cuts, cuts in transfer payments, lower taxes, and a reduction in the number of foreign workers.
Netanyahu also mentioned the privatization of El Al (TASE:ELAL), legislation to split the electricity industry, and pension reform. "We could have waited ten years, and this balloon would have burst in all our faces," Netanyahu said. "But we decided not to postpone dealing with the pension funds because we understood that the future was very near… we saved the veteran funds." According to Netanyahu, many countries had expressed interest in what Israel had done in the area of pension funds recently.
Netanyahu again stressed the importance of abolishing monopolies, and said that, at a conservative estimate, monopolies cost each Israeli citizen NIS 5,000.
The Finance Minister praised Governor of the Bank of Israel David Klein for reducing interest rates, though he said they had differences of opinion from time to time.
Netanyahu said that cutting interest rates had an immediate effect, as in the US. He said it was impossible to bring about social improvement without breaking the poverty triangle. This he said was made up of welfare payments, which had grown alarmingly in the past twelve years and which, if cut, would release money for those who really needed it. The second side of the triangle he said was the monopolies. In this context he mentioned the highly concentrated banking sector which he said was not at all competitive. The third side of the triangle he mentioned was taxes. "To pay for welfare and monopolies we raise taxes, and then the middle class collapses. To change this, we must reduce welfare payments, break up monopolies, and lower taxes."
Published by Globes [online] - www.globes.co.il - on December 8, 2003