There was plenty of heat generated at the Caeserea Forum this week.
By PINCHAS LANDAU
Caeserea moved to Eilat this week. The Caeserea Forum, which the Israel Democracy Institute launched as an annual conference in 1993 - and which used to be held in Caeserea - has been wandering around the country in recent years, to Jerusalem and elsewhere. This year, the show hit Eilat - fortunately, in a luxury, air-conditioned hotel, unfortunately in a hall two floors below ground, where the distractions of the Red Sea shore remained out of sight and, presumably, out of mind.
But there was plenty of heat generated in the underground retreat. This was felt, albeit more behind the scenes, even during the first day's discussions, with one session focused on the crisis in the Israeli local government sector and another on the environmental issues facing the country and the huge gap between Israel and the developed world in everything to do with the environment, energy-saving, recycling, and the whole "green" complex.
Things warmed up much more on the second day, when the two major issues on the domestic macro-economic agenda took center stage. Even in the morning discussion, which was formally focused on the impact of the global economic/financial crisis on Israel - to date and into the near future - these two issues rose to the surface and sparked fierce differences of opinion.
These came to a head in the afternoon session, which Finance Minister Roni Bar-On chaired and which was joined for an hour or so by Prime Minister Ehud Olmert, the subject of which was indeed Israeli macro-economic policy.
The first issue relates to the budget and the rate at which public spending should rise next year and/or in the next few years. The current government policy - embodied in a formal commitment to the Israeli public, to the US government, to the IMF and just about everyone else - is to constrain the rate of rise to 1.7% per annum. The logic behind that number is that it is equivalent to the rate of population increase.
However, a research paper commissioned by the Forum and prepared by a team from across government and academia, proposed to raise that to 2.7%, at least for the next year or two, when the world is expected to be in recession.
All the members of the preparatory team agreed to this proposal, except the one from the Finance Ministry. He was a faithful representative of his ministry, which united in absolute and total rejection of the proposal.
It was this approach that was staunchly supported by Finance Minister Ronnie Bar-On and by the Governor of the Bank of Israel, although the central bank's representative on the team had been in favor.
Apparently, there is still some room for independent thinking in the central bank - and a good thing, too. Overall, the Treasury people were in a small minority compared to the weight of academic and independent opinion - but that doesn't matter, because it's the Treasury people who will call the shots.
Yet that was the lesser of the clashes that took place in the Forum. The greater one was what, if anything, to do about "Supershekel" - the Israeli currency which, in the days before and during the Forum had once again shot upwards in value.
The two sides in this debate were, on the one hand, a series of senior figures in the business and export sector, supported by many academic economists and financial analysts, who believe that the ongoing strength of the shekel is inflicting serious and cumulatively disastrous damage on exports and hence on the wider economy - and that, therefore, something must be done about this, and urgently; and, on the other hand (this is an economic debate, remember), the Bank of Israel and the Treasury, together with some local and foreign analysts, who believe as an article of unmovable faith that the markets must be allowed to act freely and that no measures such as imposing restrictions on short-term capital movements or intervening directly in the foreign exchange market may be considered, except in the most extreme and exceptional circumstances.
Here, too, the majority may be on the side of action, but the decision-makers - namely the Governor and his staff, supported by the Finance Minister and his staff - are the people who matter.
Nevertheless, the fact that the discussion took place in full public view and the opposing positions were plainly staked out, for the first time, is of great importance.
The debate is not over, by any means. Indeed, it may well be that the battle has just begun, because if the shekel continues to throw its weight around and exporters continue to move production from Israel to cheaper locations, the pressures on policy-makers to change their sacred principles will become far more intense.
landaup@netvision.net.il