Bank of Israel Gov. Fischer
Bank of Israel Gov. Fischerphoto: Bank of Israel

Finance Minister Roni Bar-On is set to present his financial bail-out plan Wednesday afternoon, to the tune of nearly 22 billion shekels. At the same time, Bank of Israel's Governor warns that peace with the Palestinian Authority will cost Israel more money, and that hareidim must increase their work load.

The objective of Minister Bar-On's multi-faceted plan is to help Israel’s economy meet the challenges of the worldwide recession.  Calling it “unprecedented in scope,” with a 41% increase in government spending and the addition of "thousands of jobs," Bar-On said he hopes the Knesset will exhibit “political courage” and will support the plan. “Otherwise, we will have to pay a very heavy price," he warned.

The plan includes the development of infrastructures, subsidized loans to small businesses, and professional teacher training for unemployed hi-tech workers. The plan will be paid for, in part, by increasing the national deficit.

Meanwhile, Bank of Israel Governor Stanley Fischer foresees an international recovery in the second half of 2009. Speaking at the closing session of the General Assembly in Jerusalem on Wednesday morning, Fischer said Israel’s economy will face three central challenges in the coming years: Lowering poverty, improving education and perpetuating the success of Israel’s hi-tech industry. 

Hareidim Must "Change Habits"

In connection with the poverty issue, Fischer said that a “change of habits” was required in the hareidi-religious sector. “They must increase their share of the work force, which currently stands at only 25% of its potential,” he said.  Many hareidi-religious men study Torah in programs called kollelim, where they receive stipends that are significantly lower than an average salary.

New Borders Will Cost Israel

Fischer further said that Israel’s security expenses, which are already three times higher proportionately than other Western countries, may “increase even more after the signing of a peace agreement, because of the costs of defining the new borders.”

Governor Fischer said the Bank of Israel will continue to lower interest rates as long as inflation stays within the government’s target range of 1-3%.   He noted that Israel’s open economy “cannot isolate itself from the world economy,” and that Israel will not be able to avoid paying a price. However, he added, the crisis caught Israel in a good financial situation, with a stable banking network that followed conservative mortgage lending policies.

Opposition to Bar-On's Plan

Histadrut Labor Union Chief Ofer Eini and MK Shelly Yechimovitch oppose Bar-On's economic plan because it does not provide a solution for the collapsing pension fund programs.  “If I were in Netanyahu’s place,” said Yechimovitch, referring to the then-Finance Minister whose policies she strongly opposed, “I would sit quietly and refuse to be interviewed. The fact that the pension funds have not yet totally collapsed is only because he didn’t complete his plans.”   

Together with the expected injection of billions of shekels into the economy, Israel Railways will be asked to resume their work on laying railroad tracks to Beit She’an, in the northern Jordan Valley, and to Carmiel in the upper Galilee.