Peres says gov’t should help defaulting tycoons

"Everyone together should take responsibility and lead a new social contract," president tells Globes.

By STELLA KORIN-LIEBER/GLOBES
Peres and Vietnamese President Truong Tan Sang 311 (photo credit: Mark Neyman/GPO)
Peres and Vietnamese President Truong Tan Sang 311
(photo credit: Mark Neyman/GPO)
Israel’s defaulting tycoons were caught up in circumstances not of their own making, President Shimon Peres told Globes in an interview Thursday.
“My starting point is that these people did not create this situation; they were entangled in it,” he said from Hanoi, Vietnam, where he is on a state visit. “They did not raise capital to not repay it when the time came. Under other circumstances, in other times, they would have certainly repaid all the money.
“The current circumstances are such that the banks believed in them and gave them a lot of money, the investment houses believed in them and gave them a lot of money, and the public believed in them and gave them money. Until the great blow to the economy, no one – not the banks, the investment houses or the public – thought that this would happen or planned for it.
But it happened.”
Globes: It’s possible that these people were too arrogant, with overblown self-assurance, and did not prepare for a rainy day, for the great blow that is liable to fall on the world, took a lot of money thinking that, at worst, they wouldn’t have to repay it.
Peres: “I’m not talking about any particular person.
I know most of them, maybe all of them.
They are not enemies of the nation; they wanted to bring great cheer. But what happened, happened.
I want you to note: This is nothing new; it’s happened before. In 1983, during the bank-shares crisis, we paid the public NIS 7 billion – money that the banks could not repay. We had the kibbutzim settlement, the moshavim settlement.
There’s nothing new, but we were forgiving then.”
So what are you actually saying? Should the government be forgiving and help rescue the tycoons?
“I’m not their defense lawyer, but I’m not blaming them either. I say that circumstances have arisen worldwide. It’s enough to look at the US government bailout; trillions of dollars were injected to rescue the system from collapse. The EU has injected and is injecting money into institutions and countries like Greece, which are effectively bankrupt. That’s why I am saying that different thinking is needed that suits the situation.”
Do you mean that the public should be understanding? That the public should forgive the people who want to give them haircuts and take away what they are owed?
“No. It’s unreasonable for the public to announce that it will forgo its money. There must be leadership that becomes involved in the situation that has arisen. There must be a stage rapprochement.
Today, in my opinion, the government should stop watching from on high, stop trying to stand at the head of the economy, but try to stand in front. In front of means to advance. Not to reign, but to lead. Not to rule the economy, but to lead and direct it forward.
“Our economic leadership needs new and different thinking, revolutionary if you will. It’s not a matter of new laws or decisions or new regulations.
Not at all. We have enough of those, masses of laws that no one enforces. Like laws to fight traffic accidents. We have lots of laws, but traffic accidents happen and are increasing. Support and leading the economy isn’t built on clauses and provisions.”
What is it built on?
“On intervention, on enforcement and on realizing that the world has changed. That’s why I ask the country to write a new social covenant.”
What will be in it?
“I don‚t know what will be in it, but I am sure that it will include some of the most important things, such as housing. There are a lot of possible solutions, but first of all there must be public housing because people are struggling and cannot afford to buy a home. At the same time, it should be possible for young couples to buy a home at a reasonable price. I paid 60,000 lira at the time for my apartment in Ramat Aviv; half came from my father and half from a mortgage.”
When you bought your apartment in the early 1970s, there were no CPI-linked mortgages. Besides, you were a well-known public figure. Anyway, your brother, Gigi Peres, built the neighborhood.
“But my brother didn’t give me a discount, nor did I ask for one. Besides, my father also paid for half of my brother’s apartment. The problem is that today parents can’t afford to help their children. The changes that took place over the years – the inflation, interest-rate changes, pension and savings policies – effectively wiped out parents’ accumulated savings.
They cannot afford to help their children. A young couple, even with both parents working, cannot save money and can barely make ends meet.”
You’re talking about a very wide range of changes – revolutionary in your words – but how will you finance it?
“I’m not talking about financing at all. I’m talking about democracy, which today is a social contract. I’m talking about a new system of concepts, of society, of social awareness, governance, economics and citizenship. It’s definitely not directives, laws and orders. Nor is it tug of war or boxing – not between ministers, not between government and the citizens, and definitely not between politicians and parties.
“I call on our voters to enter the picture. To be responsible adults. Everyone together should take responsibility and lead a new social contract. If they don’t do it today, they’ll do it tomorrow, but the road will be harder and longer. It’s a shame to waste the time.”