Koolanu to Bank of Israel: Stability, but not at any cost

Kahlon: We know that there’s a balance you have to strike between competition and stability.

Shekel money bills (photo credit: REUTERS)
Shekel money bills
(photo credit: REUTERS)
The Bank of Israel is too conservative in its pursuit of financial stability, Koolanu leader Moshe Kahlon told The Jerusalem Post in an interview Sunday.
“Let me be clear, people shouldn’t think we’re against financial stability. Financial stability is important,” Kahlon said. “What I’m saying is, you can’t tell a person: ‘I’m preventing you from enjoying competition and that’s how I create stability.’ It doesn’t work out.”
In January’s semiannual financial stability report, BoI cited the housing market as the largest risk to the domestic financial system’s stability.
At the time, Koolanu criticized the bank for worrying about the banks’ – and not the citizens’ – financial stability.
Tough BoI mortgage standards aim to avoid a subprime bust similar to the one that decimated the US financial system and economy in 2008.
BoI Governor Karnit Flug – whom Kahlon says he respects greatly – told the Post last week that “when we talk about financial stability or the stability of banks, we are thinking of the good of households, consumers and people.”
Financial breakdowns, she said, costs people tremendously, and relies on tax-funded bail-outs.
Kahlon on Sunday responded: “We know that there’s a balance you have to strike between competition and stability,” but when asked if the central bank was too conservative, he replied in the affirmative.
The Finance Ministry aspirant – who admitted he would settle for controlling the Israel Lands Authority if he didn’t get enough mandates in March’s election – provided new insight into his fiscal outlook.
He agreed with the Zionist Union’s Finance Ministry candidate Manuel Trajtenberg that Israel could expand its public sector to 40 percent of GDP.
“When you reduce the public sector it’s nice and it’s important, but we have to take into account that we used to be No. 3 or No. 4 in education and now we’re No. 37, that in health we’ve gone down. The fact that you’ve made the public sector smaller, but then some people pay more for health and education and others don’t because the state doesn’t provide it, increases inequality,” he said.
Though Koolanu has released a platform that includes funding more child care, taking care of the elderly and helping fund unemployment benefits (but not sick leave) for independent workers, it has not said how much its plans will cost or how it fund them. Kahlon says he will not raise taxes, but would not specify where cuts could be made.
According to the BoI, even if the government will cuts budgets in accordance with legal spending limits, it must find NIS 8 billion of new revenue through 2020 to hit deficit targets.
Kahlon rejected the analysis, but explained when he thought deficits were acceptable.
“Debt is a tool, not an objective. The question is what do you do with that money. If you’re creating infrastructure, making more jobs, reducing social gaps it’s okay. If you’re taking money to the casino, then you don’t borrow it.”
He did manage to find a few kind words for those already serving in government.
He said he supported Labor MK Stav Shaffir’s crusade for transparency in the Knesset Finance Committee, for example.
“All public money should be transparent. Any public money that’s not transparent is a problem,” he said.
Training programs to help integrate Arabs and the ultra-Orthodox, two populations he called “very important for the economy,” were headed in the right direction, but needed to be ramped up.
On efforts to bring down food prices that started yielding results, he acquiesced as well.
“Listen, there are many things in the Cost of Living cabinet that are good. The problem is that they didn’t implement them. Not everything that we’re bringing is new, we are saying: implementation, implementation, implementation.”
Ultimately, Kahlon’s focus is on reducing concentration throughout the economy and cutting red tape.
“We need to be like America in this regard. Here everything is forbidden except for what is allowed. There, everything is allowed except for what is forbidden,” he said.