Histadrut Labor Union leader Ofir Eini has threatened to call a general strike over the new Finance Ministry plan that rejects a demand to provide protection for pension funds. The investments have lost approximately 20 percent of their value during the stock market crash the past several months.
Finance Minister Roni Bar-On (Kadima) announced a $5.5 billion stimulus plan Wednesday afternoon that promises 10,000 more jobs. Opposition leaders and several government coalition members have roundly mocked the proposal for not focusing on fundamental problems in the economy. The Israel Manufacturers Association also criticized the stimulus plan for ignoring the crisis in capital markets.
Eini warned that he will order a general strike would virtually shut down the country if the government does not agree to provide a "safety net" for the funds.
The Israeli stock market has not escaped the global market crash, which has driven down major indices by 50 percent in less than a year.
The pension funds have suffered smaller losses because they keep a large part of workers money in government bonds. However, a 20 percent drop in less than one year knocks a big hole in retirement savings for workers who are covered by company pension funds.
Eini: Plan Doesn't Protect Workers
Eini ridiculed the stimulus plan, which he said would not prevent layoffs. Bar-On claimed that his proposal of an additional government investment of over $5 billion would focus on infrastructure and tourism projects and would add 10,000 news jobs to the economy. He listed teachers, construction workers and secretaries as examples of occupations that will be in higher demand.
However, the proposed higher government outlay and lower tax revenues resulting from the current economic slowdown would cause a sharp rise in the government budget. A higher deficit requires increased government borrowing, a step that weakens the shekel and boost interest payments.
The budget deficit this year was planned to be approximately 1 percent of the gross domestic product (GDP), but the economic crisis has thrown the projections out the window. Finance Ministry officials now estimate the deficit will balloon to nearly 3 percent of the GDP.
Meanwhile, the pension funds still are losing their value. Major indices in Tel Aviv are down 4 percent on Thursday. Investors, fearing that the stimulus plan will cause higher inflation, have sold shekels and bought the dollar, which traded Thursday morning at 4 shekels for the first time in more than a year.