The intentions of Israel Aerospace Industries, Amdocs, and The Phoenix Holdings to lay off hundreds of employees each has torn away the mask: the economic crisis is not temporary, leave without pay is not a bridging measure. The State of Israel is not rumbling towards the most severe economic crisis in its history; it is already at the height of it. And no-one is taking responsibility. All that surrounds us is chaos and emptiness.
The layoffs of hundreds of employees at each of these major companies is a drama not because their blood is redder, but because this is just the start. The harbinger of a trend. This is not just "the crisis of the young" or of "the lowest deciles". We are in an all-encompassing economic crisis that penetrates to every corner. The consequences for private consumption are perhaps being delayed because of the school vacation, but they will come. At this rate, whole sectors will be wiped out, government debt will rise, enterprise will come to a halt, as will exports. Double-digit unemployment will lead to a jump in personal debt and in debts that will not be repaid. Israel is going backwards. The Israeli economy will watch from afar how the developed economies grow, just as we now watch from afar how the skies are steadily being reopened across Europe.
Almost 100 days have passed since the government launched its rescue plan for the economy. 100 days in a global pandemic are an eternity, and despite this, only half the plan has actually been implemented. While other countries renewed their support schemes time after time, Israel has trailed behind. The only significant economic decision since the crisis started - to put the country on furlough - was made by the director general of the National Insurance Institute, and not by the policy makers, and even that turned out to be a disaster.
The economic picture at this point is far from encouraging, but it is fairly clear. The situation is tough, and a series of data from the past week demonstrate that. The unemployment rate stands at 21%, 852,000 people, compared with just 4% before the crisis. National Insurance Institute figures released this week reveal that the NIS 6 billion aid fund has not proved sufficient incentive for firms to reinstate employees. At the last minute, just before the period expired, Minister of Finance Israel Katz extended entitlement to unemployment benefit. He did this despite having boasted just a few days previously of "data from Google" that according to him indicated a torrent of people returning to work. He soon had to admit that the torrent wasn't even a dribble.
In Canada and the Netherlands, unemployment benefit was extended to August well in advance; in New Zealand and Australia it was extended to September, in the UK to October, and in the US and Singapore until the end of the year.
The mirror of the economy is the desperately poor financials released this week by public companies such as Castro, Golf, and Fattal. Listed companies now reporting their results up to the end of March (taking in just the first two weeks of the crisis), have made accounting adjustments. On the operating side, the worst is still before them. Before all of us. Even the Ministry of Finance's revised growth forecast indicates that, with an outlook of negative growth of 5.4% this year.
Figures are one thing; action is another. The minister of finance is negligent, the prime minister has gone AWOL, the new minister of economy and industry dozes, and Ministry of Finance officials are stricken with petrified thinking. Israel's economic leadership is so paralyzed that there isn’t even agreement on the state budget, not even on whether it will be for one year or two. The people at the Ministry of Finance have thrown reforms pulled out of a dusty and irrelevant drawer into the Economic Arrangements Bill, aid budgets are stuck, and the Tax Authority even has the nerve to demand money back from the self-employed.
Published by Globes, Israel business news - en.globes.co.il - on July 2, 2020
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