C'tee OKs economic program principles

Bar-On hopes pension plan will be implemented within 3 weeks, urges banks to increase credit.

Bar-On 248.88 (photo credit: Ariel Jerozolimski)
Bar-On 248.88
(photo credit: Ariel Jerozolimski)
The Knesset Finance Committee approved Monday afternoon the principles of the Treasury's economic stimulus program to cope with the financial crisis. The Treasury's four-point stimulus package will provide a total of NIS 11b. in capital and guarantees as well as tax exemptions for overseas investors to encourage foreign investment in the local market and boost liquidity. In a move to assist credit availability in the banking sector NIS 6b. will be allocated as guarantees to the banks for the raising of capital. A further NIS 5b. will be used to set up a number of investment funds in partnership with the pension institutions (provident funds, pension funds and managers' insurance providers) for the provision of non-bank credit and to deal with the refinancing of bonds. The establishment of the private investment funds will be on the basis of tenders. Out of the NIS 5b., NIS 3b. will be allocated with immediate effect and NIS 2b. in five months time. During the Finance Committee meeting, Bar-On called on banks to increase credit with the aid of guarantees that they would receive from the government. He added that the government would help bond issuers repay their debts. Also during the meeting, Bar-On said he hoped the government safety net plan for pension funds would be implemented within three weeks. He told the committee that his ministry was preparing amendments to the plan, which, he said, would be submitted within the aforementioned time-frame. Israel Manufacturers' Association president Shraga Brosh urged committee members to approve the Treasury's plan, although he called it "small and clumsy," according to Israel Radio. He vowed that the manufactures would not rest until the Treasury put together a more serious package. Meanwhile, Histadrut Labor Federation chairman Ofer Eini stressed that the most important thing was to prevent redundancies. Employees from the Tikshuv corporation in the Karmiel disrupted the meeting, demanding that the committee discuss the impending closure of the company. Concerning the safety net for pension savings, last week, Prime Minister Ehud Olmert and Bank of Israel Governor Stanley Fischer called for task forces from the Finance Ministry, the Prime Minister's Office and the central bank to come to a swift agreement for its immediate adoption of the Olmert and the Finance Ministry have submitted two proposals, one of the major differences between them being the age factor. The Treasury's pension safety plan is expected to cover only a few tens of thousands of savers, as it would apply only to pension savers aged 60 and older who earn less than twice the minimum wage, or about NIS 7,700 a month. The safety net will not be retroactive but will guarantee savings only from the date on which the Knesset approves it. The proposal put forward by Olmert is to broaden the safety net by lowering the minimum age to 55. Sharon Wrobel and Shelly Paz contributed to this report.