Olmert: Gov't won't intervene to ease dollar slump

Finance Minister Bar-On says Israel's economic strategy is "to be part of the global world."

olmert smile 224.88 (photo credit: AP)
olmert smile 224.88
(photo credit: AP)
Finance Minister Ronnie Bar-On on Thursday reiterated the government's stance on a free-currency market, rejecting this week's urgent calls by exporters to intervene in a move to ease the sharp plunge of the shekel-dollar exchange rate. "Israel's economic long-term strategy is to be part of the global world and not government intervention or currency protection, and therefore we need to keep an open, free and transparent foreign-exchange market," he said at Manufacturers Association of Israel annual conference in Tel Aviv. "To be part of the global world we need to keep monetary and fiscal stability responding to rising inflationary pressures." On Wednesday, Manufacturers Association president Shraga Brosh urged the Finance Ministry to take emergency action to stem the sharp slide of the shekel-dollar exchange rate and avert a "national disaster" in the local export industry. If not, the manufacturers said, the industry was poised to lose $3.5 billion worth of orders and 30,000 jobs this year. "The currency fluctuations weighing on local exporters are the cause of global currency fluctuations and the state of the global economy, which we cannot influence," Bar-On said. "As is common in the global economy, local exporters could, for example, insure against exchange-rate risk or seek alternative markets that are not linked to the dollar and diversify to minimize their exposure." Prime Minister Ehud Olmert, speaking at the conference, said local industry had been one of the main engines for the strong growth in the economy in 2007. "The economy is in a marvelous situation and the economic successes of the local industry contributed a significant portion to this achievement," he said. "I understand that the fall of the dollar weighs heavily on the industry, and in particular on exporters. However, after debating the issue with Governor of the Bank of Israel Prof. Stanley Fischer and Bar-On, I fully support their decision." Olmert said the government would continue to monitor the situation and assist the manufacturers with alternative solutions. "I have much hope that this situation is temporary," he said. "I am convinced that the strength of Israeli industry will secure its achievements and ensure its success, even if for a certain period of time the dollar exchange rate is not promising the level of profitability that we have been used to over the past few years." Olmert said the government was working on a three-year socioeconomic plan to reach annual average growth rates of 6 percent by 2010. The plan includes serious tackling of the poverty problem, increasing employment, investment in education and developing the periphery into an inseparable part of the economy, he said. "Unemployment fell to 7.3% in the third quarter of 2007," Olmert said, "and according to our estimates the figure dropped further to 6.9% in the fourth quarter. Until 2010 we are aiming to bring another 90,000 people into the workforce."