Ronnie Bar On 88 248.
(photo credit: Ariel Jerozolimski)
With election day around the corner, Finance Minister Ronnie Bar-On on Monday took the stage at the Herzliya conference to blast the "merciless" policies of Likud chairman Binyamin Netanyahu and bury the "socialist" policies proposed by Ehud Barak.
"Over the last couple of years, we have successfully governed a balanced economic policy which neither bows down to destructive capitalism nor disregards the needs of weak groups of society, unlike the merciless policy led by Binyamin Netanyahu - a policy remembered by many citizens whose refrigerators stayed empty," said Bar-On at the ninth annual Herzliya Conference on Monday.
"On the other hand, we did not lead the economy to pure socialist policies which disregard the private sectors and the powers of the free market, its internal growth engines and its ability to correct itself - the policies suggested by Ehud Barak."
Bar-On added that in spite of the impossible political reality and populist demands from all sides, the Treasury has managed to maintain fiscal and social responsibility in times of growth, a policy which today allows the government the necessary flexibility to cope with the deepening crisis.
"Within the framework of balanced economic policy-making we have maintained a responsible fiscal policy, with the long-term goal to bring down the debt-to-GDP ratio while at the same time maintaining the government's spending ceiling," said Bar-On. "Since the outbreak of the crisis we have brought forward an economic stimulus package to strengthen internal growth engines, support employment and investment in infrastructure in the periphery."
Bar-On attacked political leaders and rivals for selling illusions and promises on the eve of elections, which have no economic basis or operative plan and have no connection to reality.
"Bread and circuses for the mob - just put us in the chair we long for. The promises made on the eve of elections are completely removed from the context of the economy's capabilities, the deficit problem, the national debt situation and the ability of the government to raise money," said Bar-On, referring to Netanyahu's tax-cutting plan and Barak's promise to increase government spending. "The public has already felt the blows of Bibi and Barak and they know that the promises that are being spread, however sophisticated, can not hide the reality."
Bar-On said cutting taxes by 20 percent, as suggested by Netanyahu, would reduce revenues by an estimated NIS 25 billion to NIS 30b., while Barak's call for raising spending and increasing the deficit would create a hole of NIS 25b. in the budget.
"Tax revenues are already expected to come down, and if we reduce tax revenues by as much as Netanyahu proposes, and add to the spending side everything that Barak proposes, we would be running a hole in the budget of NIS 50b. before even starting to deal with the economic crisis, how will we run the country? Are they alchemists?," said Bar-On.
Also speaking at the conference was Prof. Rafi Melnick, Provost of the Interdisciplinary Center Herzliya, who warned about proposals to reduce taxes or increase expenditure.
"In light of a reduction in [predicted] tax revenues and the state of uncertainty resulting from the global crisis, the new government should not cut taxes or raise expenditure, while allowing the deficit to rise to 5% of GDP," said Melnick. "The main task today is to restore the proper functioning of the credit market. The Bank of Israel needs to intervene and implement extraordinary measures, to revitalize the market."
Teva chairman Eli Hurvitz blasted the Treasury's multi-million shekel high-tech assistance plan announced on Sunday.
"The plan is a lot of nonsense," said Hurvitz. "Plans are being set up by people who are not connected to this reality, and therefore such solutions will fail in the present and the future. Before making the decision over this plan and allocations they should have consulted more with industry, in particular in these times of crisis. And I haven't started talking about the sum that has been allocated, which I also find wanting."
Under the terms of the plan, the Treasury proposes to increase the budget of the Office of the Chief Scientist by NIS 150 million in the first quarter of 2009, in addition to the allocation of NIS 250m. for the establishment of a new fund that will invest in biotechnology, and adding NIS 50m. to set up R&D centers in the periphery.
"Eli, with all due respect, it's impossible to consult all the time with everyone who thinks he has something to say," said Bar-On in response. "We are seeking advice from a number of leading economists such as Emanuel Trajtenberg, Prof. Melnick and leading bankers. However we are not consulting people who have a private agenda pushing sectoral interests, who can not keep a secret and run to the press every day."
Having the last word, Hurvitz said that that there was no dialogue with the relevant sources in the economy and the industry on many issues and decisions taken.
"This dialogue is crucial, otherwise the government will lose the confidence of the establishment," said Hurvitz.
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