Steinitz: Labor would destroy Israeli economy

Speaking to 'Post,' finance minister derides Labor's economic platform, but refuses to lay out his own plan of budget cuts.

December 30, 2012 19:16
4 minute read.
Yuval Steinitz

Yuval Steinitz 370. (photo credit: Hadas Parush)


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Finance Minister Yuval Steinitz derided Labor chairwoman Shelly Yacimovich’s economic policy on Sunday, calling it a “plan of economic destruction” that would turn Israel into another Spain.

“Take Shelly Yacimovich’s plan, put it in place, and the Israeli economy will look like Spain’s and even worse,” Steinitz said in an interview with The Jerusalem Post.

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“Those naive suggestions will ruin the Israeli economy.”

Steinitz specifically rapped the Labor leader for proposing an increase in the corporate tax rate to 30 percent. He said that if multinationals like Intel and Teva are stripped of incentives that see them pay taxes as low as 6%-12% on business activities in the country’s periphery, they will stop investing and “some of them will even leave the country in two to three years.” The current corporate tax rate is 25%, but some multinationals get tax breaks for establishing centers in the periphery.

Steinitz criticized Yacimovich for proposing expenditures of around NIS 140 billion, adding that he could not recall any Israeli leader making such extravagant commitments prior to an election.

Labor’s socioeconomic team responded to Steinitz’s criticism, saying that if his and Netanyahu’s economic policies continue after the January election, Israel will be a “social hell.”

“It’s amazing to see how stressed the prime minister and finance minister are from their inability to give real answers to the questions that bother Israeli citizens, so they increase their attacks on the only responsible plan that has been publicized and is supported by many economists,” Labor stated, referring to the party's platform.

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Labor added that the Netanyahu government was economically irresponsible, harmed the poor, ushered in an unprecedented deficit and led the middle class to fall apart.

Steinitz acknowledged that the next government would need to cut around NIS 14b. from the 2013 budget, but refused to detail where the cuts would be made, except to say that there are “several possible alternatives.” He said he preferred not to go into details now, as the nature of the spending cuts would be “up to the new government to decide.”

“I can only say that there were similar cases in the past decade, and at the end of the day we found the right way how to make those cuts,” the finance minister said.

He repeated comments made last week that it is unlikely a Likud-led government would impose fresh tax hikes next year, although he did not rule out implementing tax increases depending on how economic forecasts play out.

“As it seems, we will not have to impose tax hikes, and if we do need to, it will be minimal,” he said.

“But... we will have to wait and see what developments there are, what revenues we collect from trapped profits.”

Playing down the impact of his decision to raise the value-added tax to 17%, Steinitz noted the rate fell in the normal historical range of Israel’s VAT, and took another swipe at Yacimovich for claiming she could decrease the tax while ratcheting up expenditures.

Although he focused most of his energies on Labor, he also criticized other political rivals such as Yesh Atid leader Yair Lapid, Interior Minister Eli Yishai of Shas, Bayit Yehudi leader Naftali Bennett and Tzipi Livni, head of The Tzipi Livni Party, for failing to acknowledge the importance of economic growth in social welfare.

“They’re talking about how to share the cake, but first you have to bake the cake,” he said.

Steinitz would not comment on whether he would keep his role as finance minister in the event that Likud Beytenu heads the next government, saying only that he would leave it up to the party leader, Prime Minister Binyamin Netanyahu, to decide.

He did promise, however, that the government would ensure safe passage of a bill on economic concentration if his party wins reelection.

Earlier this month, the government decided to postpone the second and third readings of the bill until after the election.

If passed, the law would enforce separation of financial and nonfinancial holdings by prohibiting control of financial institutions by large non-financial corporations. A large financial corporation is defined as one with at least NIS 40b. in assets under management and at least NIS 6b. in Israeli sales.

Steinitz pointed to this bill as evidence of the Netanyahu government’s efforts to protect ordinary Israelis, saying it proves Yacimovich wrong when she claims that Netanyahu is good for the rich and she is good for the people.

“Ask [Delek Group owner Yitzhak] Tshuva and [Israel Corp. chairman Idan] Ofer if this government was so good for them,” he said. “This government, unlike many previous Labor governments, was good for the people, and not for the interests of big companies.”

Steinitz emphasized the government’s economic accomplishments, stressing that at a time of global financial upheaval, Israel’s growth rate and moderate unemployment rate were particularly notable.

He acknowledged, however, that problems remain, particularly in closing economic gaps and lowering the price of housing. Filling the deficit of apartments would require vigorous building around the country, including the West Bank, he said.

“It is totally inconceivable that there will be another [settlement] freeze,” he said.

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