Cabinet okays pension safety net

The safety net will secure the provident funds and pension funds of savers from the age of 57.

Bar-On cabinet 248.88 (photo credit: Ariel Jerozolimski [file])
Bar-On cabinet 248.88
(photo credit: Ariel Jerozolimski [file])
• By SHARON WROBEL The cabinet on Sunday gave approval for the immediate application of the pension safety net plan, despite repeated objections by Finance Minister Ronnie Bar-On. "There are hundreds of thousands of citizens in need of this protection. My intention was to reach a plan with wider agreement, and do it with minimum noise and without shaking the Israeli economy," Prime Minister Ehud Olmert said at the weekly cabinet meeting on Sunday. "On the one hand we want to protect pension savers, and on the other hand minimize unnecessary expenses in a period when the economy and tax collection are slowing down." Twenty ministers voted in favor of the move, while Bar-On voted against it and argued that the plan should be activated only when the Treasury sees it necessary, adding that the moment had not come yet. Vice Premier Haim Ramon abstained. The pension safety net plan will be retroactively implemented from November 30. The safety net will secure the provident funds and pension funds of savers from the age of 57, following an agreement reached between Olmert, Bar-On and Bank of Israel Governor Stanley Fischer. Bar-On, also speaking at the cabinet meeting, attacked Olmert for pushing for the immediate implementation of the safety net and said that no country has until now intervened in its pension market. Furthermore, the volume of saving withdrawals by the public was not representative of panicky behavior and did not warrant immediate and aggressive intervention. Instead, Bar-On emphasized the importance of dealing with the root of the problems of the global crisis - the credit crunch and liquidity difficulties. "You [Olmert] are not the boss of the Finance Ministry," said Bar-On. In response, Olmert said he was making the decision. Discussing the global crisis at the Globes Israel Business Conference in Tel Aviv on Sunday, representatives of the business and capital market sector framed the pension safety net plan as "populistic" and urged the government to leave politics aside and implement measures to help the economy. "The pension safety net plan is very limited and no more than the result of political populism. It is nice as a headline but it does not provide a solution to the serious problem of liquidity in the real economy," said Dan Laluz, chairman of Migdal Capital Markets. Yair Hamburger, chairman of Harel Insurance, called upon the decisionmakers to put aside all "games of ego" and intervene to support the economy even if it will cause fiscal problems in a couple of years. "There is a credit problem in the economy as the non-banking credit sector has completely dried up and ceased operating," said Shlomo Zohar, chairman of Israel Discount Bank. "Immediate intervention and implementation of the Treasury's economic and financial package is essential. Any further delay will deepen the impact of the crisis and the price we will have to pay." On Monday, the Knesset Finance Committee will convene to discuss and vote on the pension safety plan and the economic stimulus plans. For the past weeks the Knesset Finance Committee has been holding up the approval of the Treasury's multi-billion shekel plans to invest into infrastructure and ease the credit crunch because of clashes over the plan for a pension safety net. Histadrut Labor Federation chairman Ofer Eini criticized the economic stimulus plans for failing to prevent layoffs, as they don't build a link between employment and government aid. Still, Eini urged the Knesset Finance Committee to approve the plans but called on Olmert to bypass the Finance Ministry again and create measures to help stem job losses. Separately, the Finance Ministry asked the main banks on Sunday to submit proposals for a loan fund for medium-sized businesses. The government will contribute NIS 200 million to the fund, and in exchange the banks are requested to use the funds to lend as much as NIS 1 billion.