The presentation of the annual budget to the press and Knesset is usually a gala occasion. This time the occasion consisted of watching the Finance Ministry officials writhe.
They don't have easy jobs, Finance Minister Silvan Shalom and his director-general, Ohad Marani. Slammed in the chops by the hard times, they huddled into defensive positions.
They didn't try to claim that things will be better in 2002. They didn't claim to have solutions to Israel's most pressing problems, such as unemployment. Instead, they chose to highlight the uncertainty with which 2002 will inevitably kick off, the uncertainty that will serve as their excuse in case of failure.
Marani says that 2002 will start with tremendous uncertainty. It could turn either way. The economy could rally and growth could resume, or disaster could strike. He himself brought up the early 1980s, when Israel was reeling from the double trouble of the war in Lebanon and hyper-inflation.
Marani and Shalom both reviewed Israel's economic problems at length: more money needs to be spent on defense; the global economic crisis; the collapse of hi-tech around the world and in Israel; the tourism crunch; and the troubles following the September 11 attacks on the U.S.
Their sorry conclusion? That given the hi-tech plunge and the collapse of tourism, Israel today has no business sector that could lift the marketplace to renewed growth.
With regret, they designated infrastructure as the one area that might save the situation next year, allocating no less than a billion and a half shekels to it alone. They also promised to encourage the private sector through investment mechanisms such as BOT (build, transfer, operate).
That, said Marani and Shalom, will be the engine powering the economy of 2002, reducing unemployment and boosting growth.
Maybe so. Even they didn't sound convinced. They admitted that red tape and legislative snags could torpedo the whole concept. Unless the Knesset passes laws to streamline planning and permission procedures, they admitted, none of these programs will get off the paper of the budget book.
Closing the borders won't do it
Their other idea to reduce unemployment wasn't particularly original either. They propose to reduce the number of foreign workers in Israel. Marani showed a graph showing that with the exception of Switzerland, Israel has the greatest proportion of foreign workers per capita in the west.
But clearly, reducing the foreign workforce won't do the trick of lifting economic growth to the treasury's goal of 4% of GDP in 2002, especially after the 0.5% growth rate of 2001 ¿ which translates into negative growth per capita.
This is when the treasury twain really began to squirm, when discussing that 4% growth forecast. Not only the media but also the Bank of Israel and the IMF have slammed that target as utterly unrealistic.
Having taken many an arrow already, Marani dodged: "We know it will be have to achieve such growth," he said. "But we still think it can be achieved, simply because we're starting from a lower base point."
He also tried to claim that since tourism and hi-tech had already sunk like a stone 2001, they wouldn't continue to deteriorate at the same rate in 2002.
Moreover, he said, even if growth fall slightly below the forecast, the government wouldn't have to reopen the budget.
But none of that answers the following question: Why not simply base the budget on a more realistic growth target, say of 2.5% or 3% - especially as Marani himself thinks these numbers are more sensible?
When do you call a spade a spade?
Eventually, Marani himself supplied the answer to that 4% riddle. Naturally, the treasury could have set the target lower, he said. Bu then it would have had to take an ax to the ministerial budgets, which it didn't want to do, because it would be politically difficult, and the government policy today supports fiscal expansion.
Read: The government deficit will sprout far beyond its target for 2002 of 2.4%. The treasury already knows that perfectly well, it just refuses to call spade a spade just yet.
Beyond twisting the treasury's tail over its dubious forecasts for 2002, a far greater issue looms. Namely, the government again missed an opportunity to handle the real canker at the heart of Israel's economy: the enormous transfer and other subsidy payments to certain segments of society, such as large families. Such payments comprise a stunning 31.2% of Israel's total budget.
Ohad Marani touched on the issue, saying that these payments were hampering growth and discouraging employment. He said they were perpetuating poverty, and added that at times of crisis like now, the phenomenon should be tackled. He said it. That's all, folks.