Economic crisis severely limits coalition options, Bar-On warns

Netanyahu promises plan to avert factory closures.

bar-on bibi 88 248 (photo credit: Ariel Jerozolimski)
bar-on bibi 88 248
(photo credit: Ariel Jerozolimski)
Just before the start of coalition negotiations, Finance Minister Ronnie Bar-On on Tuesday, reminded Prime-Minister-designate Binyamin Netanyahu of the limitations he faced in light of the ongoing economic crisis. "The global economic crisis is here, big time!", said Bar-On. "Before coalition negotiations commence it was necessary to hold this emergency meeting on the current situation of the economy which is imposing great limitations to what is possible." Bar-On added that one of the first priorities of the new government needed to be the passing of a revamped state budget for 2009. Bar-On, who initiated the meeting, presented Netanyahu with the most recent economic figures on the local economy, including an expected sharp drop in tax revenues. In January this year the state's tax revenues dropped 16 percent to NIS 14.3 billion. The Finance Ministry has already indicated that tax collection is expected to fall dramatically this year compared to last year, lowering the state's capability to cope with the crisis. Together with the costs of Operation Cast Lead, rising defense expenditures and measures to mitigate the effects of the economic crisis, the budget is already expected to run into a much higher deficit of around 6% of GDP, leaving very little room for maneuvering. In the pre-election months, Netanyahu had again and again preached that cutting taxes was the crucial component in reversing the crisis and the best engine of growth. Under Netanyahu's economic plan, over the course of four years, income tax for individuals will gradually be lowered by 20% and company tax will gradually be reduced to 18% over the same period of time. At the meeting Netanyahu also commented on the fate of the workers of the Vita-Galilee fruit packing plant, which is at risk of closure. "The livelihoods of thousands of families are in question. I will visit the periphery in the North and the South in order to develop a plan to avert the closure of factories under threat in the periphery," said Netanyahu at the meeting. Bar-On said that the ministry had been working on a special program for the periphery. "We know about the issue. We tried to help," said Bar-On. "Before the outbreak of the crisis we formulated a very good program for the periphery. We will now need to make some changes to the program in light of the deepening crisis and shift the focus to employment in the periphery." At the end of the meeting the two agreed to hold additional meetings with Finance Ministry officials over the next few days. Following the meeting with Bar-On Netanyahu met with Bank of Israel Governor Prof. Stanley Fischer to discuss the current economic climate in light of the global economic crisis and the challenges the economy is facing. Meanwhile, Shraga Brosh, President of the Israel Manufacturers' Association, urged the party leaders to put all other issues aside and put the economic situation at the top of the agenda. "We are in an economic and social emergency situation," said Brosh. "I call upon Netanyahu, Tzipi Livni, Ehud Barak, Avigdor Lieberman, and Eli Yishai to do everything in order to bring about the broadest possible national unity government. Without a broad unity we will continue to see tens of thousands of unemployed each month and whole cities in the periphery collapse one after the other." Brosh added that only a broad unity government would be able to implement courageous and painful measures and act to find the best possible solutions to cope with the economic crisis.