This could be a chance to fix the country’s long-term economic troubles, but it’s hard to see how a vulnerable transitional government preparing to turn and act coalition negotiations can do it well
The Knesset disbanded at midnight Tuesday, sending the Israelis to a fourth round of voting in two years. Anyone who tried to work with the unity government understood that it was best to end their term after not approving a budget or making appointments for half a year.
The great hope is that there will be a functioning government within a few months after the elections, but under the circumstances political stability still seems unattainable. In the meantime, Israel will continue to pay a heavy price in many areas.
The main reason is the atmosphere of chaos. At the beginning of December, the rating agency Moody’s retained the Israeli country rating and found that points for “institutions and governance strength” had been deducted. ”
The international rating agencies could not ignore the most recent change: four elections in two years. A possible downgrade to the sovereign debt rating. A new election means uncertainty about the policy of the next government.
Insecurity is bad for business, and the biggest economic player of all – government – is paralyzed.
Then comes the political decision-making. Anyone who has held the dysfunction to be a record for the past six months needs to see how bad things can get. Now, decisions about lockdowns and economic easing are made with the vote in mind. Not to mention future grants or compensation. Future decisions about reopening the economy in response to vaccination benchmarks will also be made in view of the polls.
With hundreds of thousands of Israelis being vaccinated, Israel must above all rehabilitate its economy. This could be a chance to fix the country’s long-term economic troubles, but it’s hard to see how a vulnerable transitional government preparing to turn and act coalition negotiations can do it well.
And then there is the question of the budget. Israel will be without a budget for at least another six months as it is forced to work through the most recently approved budget, which will be two years old.
The Treasury Department has tabled immediate legislative changes necessary to prevent the 2021 budget from running into a deficit of 100 million shekels ($ 31 million). This includes 50 billion shekels for coronavirus-related expenses and carrying over a budget surplus of 20 billion shekels from 2020 to 2021.
In a cabinet meeting on Tuesday, the coalition agreed on a few points. Even so, the damage will be severe for many of the institutions that are being forced to run through the 2019 budget. Welfare agencies will be particularly hard hit, and many even suffer severe budget cuts at a time when the pandemic has driven many Israelis into poverty.
International bodies have warned that the pandemic will exacerbate Israel’s high levels of inequality. Now the institutions that could handle this do not have the money to operate.
Haredim is particularly affected. The flagship of the Haredi parties is yeshiva funding, which will drop by 30% if a budget is not passed for 2021.
Then there is the direct cost of another option. It’s not clear how many billion shekels the electoral boards, parties and the extra day of vacation will cost, but coronavirus protection will affect at least 50 to 60 million shekels more.
International bodies expect Israel’s economy to grow more slowly than the global average in 2021. In its latest report, the Organization for Economic Cooperation and Development predicted that Israel’s gross domestic product would shrink by 4. 25 percent in 2020, around the international average.
For the next few years, however, the OECD expects Israel’s growth to fall below average due to high unemployment and the bankruptcy wave that is likely to occur after the end of government aid. The OECD therefore predicts that Israel’s GDP will only increase by 2. 25 percent in 2021, below the global average forecast of 4. 25 percent.
This forecast, which is pessimistic even when compared to local forecasts by the Israeli Finance Ministry and the Bank of Israel, takes into account Israel’s political instability. The rating agencies also took into account Israel’s political instability.
And yet, when Israel goes to the polls again, the pessimistic forecast will likely become even more pessimistic. Israel will have neither a government nor a Knesset to put in place a post-pandemic recovery plan.
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Haaretz. com, the online edition of the Haaretz newspaper in Israel, and analyzes from Israel and the Middle East. Haaretz. com offers comprehensive and in-depth coverage of Israel, the Jewish world and the Middle East, including defense, diplomacy, Arab-Israeli conflict, peace process, Israeli politics, Jerusalem affairs, international relations, Iran, Iraq, Syria, Lebanon, the Palestinian National Authority, the West Bank and Gaza Strip, Israeli Business and Jewish Life in Israel and the Diaspora.
Israel, Knesset, government
World news – USA – The cost of a poll: Electoral economy instead of reconstruction
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