Yuval Steinitz 248.88.
(photo credit: )
The government will not intervene to help Africa Israel Investments Ltd., the real-estate company controlled by diamond baron Lev Leviev, Finance Minister Yuval Steinitz said Monday.
"This is not a happy situation, but we are not talking about a macroeconomic event that will have an effect on the economy as a whole," he said at a press briefing on the state of the economy Monday in Jerusalem. "This is one specific event. There is no risk for the economy, a bank, a financial institution or the pension savings of the public."
Africa Israel announced Sunday it was having difficulties in securing new loans to refinance debt and would seek a new settlement with bondholders.
Steinitz said the exposure regarding the risk Africa Israel's debt problem was posing on pension savings was 1 percent or less.
Africa Israel's shares plunged more than 25% on the Tel Aviv Stock Exchange Sunday as the company reported second-quarter losses of NIS 1.32 billion, compared with NIS 91 million a year ago, after a sharp fall in its real-estate investments in Russia and particularly in the United States. On Monday the shares dropped another 13.6%.
"We predicted the possibility of such events," Steinitz said. "Already back in April we made it very clear that we will not intervene directly between borrowers and lenders, and therefore the government will not intervene in the company's debt arrangements, in particular not in cases of failure to repay bonds. At the same time, we are offering tools to assist in this situation for the institutional market to restructure debt."
He said the Finance Ministry was introducing a new economic index called "Red Lights," which is aimed at identifying trends in the economy by real-time monitoring. The index is composed of nine macroeconomic variables: real economy, taxation, foreign trade, labor market, price stability, capital market, global data, real estate and mood, he said, and would give a comprehensive picture of the economic climate and changes in it.
"In the July index we are seeing signs for a beginning of a recovery," Steinitz said. "The worst of the crisis is behind us but the road to full recovery is long and still difficult. Therefore, it is important that we maintain strict fiscal discipline and implement the economic plan."
Despite positive indicators, the ministry was not rushing to update its growth forecast for the economy, he added.
"We are not making updates to our forecast every month," Steinitz said. "Economic indicators are showing improvement in the right direction, but it will still take time before we update our own forecast."
The Treasury expects the economy to grow at a negative growth rate of 1% in 2009 and return to positive growth of 1.5% in 2010. The Bank of Israel has forecast that the economy would contract by 1.5% this year and grow at rate of 1% in 2010.
Finance Ministry director-general Yarom Ariav said seven out of the index's nine economic indicators had had positive developments compared with the previous month, and only two indicators - real estate and the price stability - showed a deterioration.
Revenues from indirect taxes surged 23.3% in July compared with the previous month, mainly as a result of one-off actions such as the increase in value-added tax and the implementation of "green" taxes, he said.
"This is a dramatic leap, but we will need to examine the figures over the next couple of months before we can talk about a turnaround," Steinitz said. "In August, we expect to see some improvement but not as large as in July."