The government on Sunday backed down to demands of bakery owners and agreed to raise the price of subsidized breads by 12.5 percent, ending the two-week long crisis that had led to a shortage of these breads, mainly bought by the poorer population, on supermarket shelves.

"We have not yet received the new price-controlled bread directive and a date, which would allow us to raise prices for these breads and until then we can not commit to resume full production of price-controlled breads," Yochanan Aharonson of Davidovich Bakery & Sons Ltd., who is also acting as the bakers' representative in the talks with the government, told The Jerusalem Post.

The cabinet on Sunday approved the recommendations of a special committee, which was established last week to investigate and settle the matter of government-controlled bread prices.

According to the recommendations of the committee, headed by the Director-General of the Prime Minister's Office Ra'anan Dinur including representatives of the Ministry of Industry, Trade and Labor and the Finance Ministry, social security benefit seekers would be eligible for a monthly allowance in compensation of the 12.5% hike in bread prices, which is expected to come into effect this week.

Compensation to the weaker classes will come in the form of a new index to reflect consumption patterns among the bottom 20th percentile and will be linked to National Insurance Institute payments and the consumer price index. Within 45 days, the committee, to which representatives of the National Insurance Institute and the Welfare Ministry will be added, has been ordered to prepare the required adjustments to the current legislation to compensate weaker population groups. The last stage of the committee's recommendations foresees the removal of state-controlled fixing of prices of breads altogether, which is scheduled to take affect starting January 1, 2008.

A survey conducted by the Histadrut Labor Federation consumer group found that 77% of the public believed that basic foods such as bread should remain under government controlled price regulation. Furthermore, the survey showed that still 42% of Israeli residents were buying price-controlled breads.

PRICE-CONTROLLED BREAD will roll off bakery lines again soon after the government caved in to demands for a 12.5% increase to help offset higher flour prices.
Photo: Ariel Jerozolimski

Since the beginning of the month the country's major bakeries, including Angel Bakery, Davidovich, Berman's and the Alumot Bakery in Holon, decided to halt the production of price controlled breads as mills raised flour prices by some 35-40% in response to the recent sharp rise worldwide flour prices.