Finance Minister Yair Lapid addresses the INSS conference in Tel Aviv, January 29, 2014..
(photo credit: CHEN GALILI)
Finance Minister Yair Lapid (Yesh Atid) announced several new steps on Monday to help ease the economic burden on the South resulting from the constant rocket fire.
The government agreed to back NIS 100 million in loans to small businesses in a 40 km. range from Gaza, which banks could leverage to pay out an estimated NIS 1 billion in loans, Lapid said on a tour of Sderot. Current and retired civil servants would be eligible for special NIS 8,000 loans from the government.
“We’ll take care of whatever we have to in order to provide an economic Iron Dome to the residents of the south who are under fire,” Lapid said.
He also announced a doubling of the NIS 15 million previously announced alongside the Interior Ministry to aid local authorities to deal with the costs.
Sderot mayor Alon Davidi praised Lapid and the Finance Ministry’s management for coming to the South to understand the difficult economic circumstances resulting from the security situation.
“There’s nothing like seeing with your own eyes,” he said.
In a visit to Barzilai Hospital, Lapid said the government would transfer an additional NIS 30 million to fortify security there, following an earlier decision to give it NIS 120 million.
The funds will be used to fortify operating rooms, intensive care units and staging areas, so that operations can continue during rocket barrages.
Monday’s plans came on top of previously announced steps that included mortgage payment extensions, speeding government payments to suppliers in the South and advanced salary payments for civil servants and retirees.
In discussions with the Histadrut, the Finance Ministry agreed to compensate residents of the South for indirect damages on the basis of terms laid out following 2012’s Pillar of Defense. It would consider updating the conditions if the situation stretches into August.
The security predicament has taken its toll on Israel’s economy, though many analysts believe the effects will not be long-lasting.
Federation of Israeli Chambers of Commerce president Uriel Lynn urged businesses to back the government’s security and political efforts, arguing that Israel’s businesses were resilient enough to withstand the pressure.
“Israel’s economy is a strong economy. It has withstood similar tests and we found the resources to give compensation for the difficulties,” he said. “It’s important for the moment to maintain strong morale in the business sector and the public.”
In the meantime, workers and businesses face very real difficulties.
The Manufacturers Association of Israel estimated that factories in the Gaza Envelope have sustained NIS 445 million in economic damage during the first ten days of the operation.
According to Globes, vegetable prices have spiked since the start of the operation.
Wholesale tomato prices have risen 47 percent, cauliflower by 130% and melon prices are up 180%. The Israel Hotel Association estimated losses have reached $100 million.
There may be negative repercussions in Israel’s capital markets if the conflict is a prolonged one, said Eyal Horowitz, chairman of accounting firm, Baker Tilly, in Israel. An extended ground campaign could lead to a sharp drop in the corporate bond market, which the Bank of Israel warned is overinflated.
If the corporate bond market bubble burst, he said, it could lead to trouble in Israel’s financial system.