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(photo credit: Stockbyte)
Prime Minister Binyamin Netanyahu said Monday the government should behave
“responsibly and cautiously” in dealing with economic challenges, as the
Organization for Economic Cooperation and Development slashed Israel’s 2012
growth forecast to 2.9 percent.
Speaking at a Likud faction meeting
Monday, the prime minister said the economy faced three central
“The shake-up of the world economy means the government must
restrain itself from overspending,” Netanyahu said. “If we don’t, we’ll pay a
The second challenge was “increasing social needs,” many of which
would be addressed via laws based on the Trajtenberg Report on Socioeconomic
Change. The third was regional instability, which, he said, was “expressed every
day in the political results in the states surrounding us” and meant greater
security challenges and a need for more resources.RELATED:
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'Israel must manage economy responsibly'
elements requires decisions that are not easy,” Netanyahu explained.
must continue to behave responsibly and recognize Israel’s needs.”
OECD on Monday downgraded the 2012 economic growth forecast for the 34-nation
bloc to 1.6% from its May forecast of 2.3%. It cut Israel’s 2012 growth forecast
to 2.9% from 4.7% six months ago. Israel’s 2013 growth forecast is now
In comparison to its fellow developed economies, Israel still
appears to be in a relatively strong position. Only six OECD member states are
expected to grow faster than Israel in 2012, including one euro zone economy –
Estonia. As a whole, the 17-nation euro bloc is now expected to grow at just
0.2%, with Italy joining Portugal and Greece in recession, and France, Germany,
Spain and the Netherlands growing by 0.6% or less.
are slowing down and the euro area appears to be in a mild recession. Concerns
about sovereign debt sustainability in the European monetary union are becoming
increasingly widespread,” the OECD said in its report.
to countries thought to have relatively solid public finances could massively
escalate economic disruption if not addressed.
Unemployment remains very
high in many OECD economies and, ominously, long-term unemployment is
increasingly common. Emerging economies are still growing at a healthy pace, but
their growth rates are also moderating.”
Finance Minister Yuval Steinitz
said on Channel 10’s evening news broadcast that the government was “preparing
for all possibilities,” acknowledging that if the euro zone collapses, as many
are predicting, “the whole world will be affected badly, including
But, he added, if the budget is cut at the beginning of next year,
it would only be a moderate “adjustment.”
Steinitz repeated comments he
has made numerous times in recent months that as head of the Treasury, his job
is to ensure the maintenance of a high level of foreign investment and economic
“I protect the Israeli economy in order to protect Israeli
society,” he added, saying he seeks to ensure Israel doesn’t end up with a
situation similar to Spain, where 50% of youngsters can’t find
Netanyahu met with Bank of Israel Governor Stanley Fischer Monday
specifically to discuss the global economic turmoil.
Netanyahu said after
the meeting the Israeli economy would continue to grow because of responsible
budget management, saying: “See what has happened to the European countries that
increased their expenditures without restraint – they have become caught up in
one of the most severe crises ever and in mass unemployment.”
central bank announced it was reducing the December interest rate by 0.25
percentage points to 2.75%. The bank said the European debt crisis and “growing
concern over its potentially strong impact on the global economy” was one of the
main considerations behind its decision.
Also on Monday, Labor Chairwoman
Shelly Yacimovich said Netanyahu’s approach to the new economic crisis would
have a “deep” and “damaging” impact on Israeli society, and would mean jobs were
lost and less money was spent on essential needs such as health.
Netanyahu’s solution? Another across-the-board budget cut?” she
Yacimovich told a faction meeting, “What conservatism, what
’80s-style Thatcherism, once again the fat cat will make us all
This is simplistic, a big mistake. It’s the opposite of what the