Business leaders want government engaged

"We are facing the threat of a global economic crisis. In Israel we feel we have a window of time to act," says Bank Hapoalim CEO Zvi Ziv.

Zvi Ziv 88 248 (photo credit: Ariel Jerozolimski)
Zvi Ziv 88 248
(photo credit: Ariel Jerozolimski)
Business leaders and financial heads are calling upon the government to cooperate in an effort to find immediate solutions to help moderate the damage of a significant slowdown in the economy. "We are facing the threat of a global economic crisis, and governments around the world are acting accordingly. In Israel we feel we have a window of time to act," Bank Hapoalim CEO Zvi Ziv said at the Prime Minister's Conference for Export and International Cooperation Wednesday in Jerusalem. "It cannot be the norm that the Bank of Israel is the only caretaker. The government needs to take the necessary interventionary steps to help stabilize the economy. Every day that passes without any action will worsen the state of our economy, leaving the country's long-term savers in a crisis from which they cannot emerge on their own." The Finance Ministry recently indicated that it was working on an economic aid package, including investment in infrastructures and the establishment of credit funds, which would be implemented once it becomes necessary. However, the ministry has not provided any further details on the extent of an aid package. "We can say that at least the first wave of the crisis, the financial crisis, has been handled relatively well by the Israeli financial system. We are not seeing the need for rescue bailouts of financial institutions, Finance Ministry director-general Yarom Ariav said at the conference. "The second wave, the crisis in the real economy, is already with us. It is clear that no umbrella is large enough to protect us from the second storm. No matter what we do, we will get wet. Here, there is room for some form of government intervention to mitigate the damage of the crisis." Ariav said there were three reasons why Israel was in a position to survive this crisis: tight fiscal discipline, tax cuts and structural changes. Ziv called upon the government to take immediate action to establish a roundtable discussion with regulators, representatives of the banks and the business sector, the Manufacturers Association of Israel and the Federation of Israeli Chambers of Commerce in an effort to formulate solutions for the crisis. "What is needed is united and coordinated economic leadership unrelated to any doctrines that were right in other times, but do not suit a crisis that has not been experienced in decades," he said. Alrov chairman, president and CEO Alfred Akirov said the government did not have the resources to stream money into the financial system, but urged it to provide guarantees to banks to enable them to service the economy. "Don't misunderstand me, there is no danger; Israel's banks are in the best state in the world," he said. "Bank guarantees will provide a safety net of confidence so that the banks can provide loans to the domestic market, which will help develop the Israeli economy." Ziv said the main question was not the question of bank guarantees but how to deal with the public's lack of confidence in long-term savings schemes. "It is the central responsibility of the government, together with the regulator, to bring back confidence to long-term savers," he said. "In addition, the government needs to formulate an economic aid package with the respective partners and recognize the business sector as a partner in this crisis." Iscar chairman Eitan Wertheimer and Akirov warned of an expected rise in unemployment. "We are going to face a period during which fewer people will have work," Wertheimer said. "What is important now is for people who lose their jobs to seek new opportunities and invest in professional retraining. Factories and businesses, on the other hand, should focus on the development of new products and customers they haven't approached yet." Akirov said there was a real threat for unemployment to rise to 15 percent from the current 6%. "The Bank of Israel is doing a good job, but we are not competing with global interest rates, which have come down to 1%, as in the US," he said. "The central bank needs to cut interest rates by another 1%, or even 1.5%, this month to aid the flow of production and avert the closure of factories and businesses and the loss of many jobs. "In addition, lower interest rates will strengthen the dollar against the shekel," Akirov said. "The shekel has dropped only 10%, making competition for exporters more difficult as global currencies have plunged over 20% against the greenback."