No economic honeymoon for Sharon’s new government

Published March 8th, 2001 - 02:00 GMT

A month and a day after Israel went to the polls and elected Ariel Sharon as prime minister in a landslide, the Knesset voted confidence in his government on Wednesday, March 7, and allowed him to officially enter office. Sharon had aspired to create a national unity government, bringing together parties from both sides of Israel’s steep political divide. He did ultimately get his wish, but was forced to divide the governmental pie between a variety of parties, with often divergent political interests. 


The result of the pre-coalition horse-trading is Israel's largest-ever government — with 26 ministers and 12 deputy ministers — meaning that almost one out of three parliament members will be fulfilling some official role. To make room for the expanded administration, carpenters worked late into the night, lengthening the table in the cabinet room and adding an inner row of seats for ministers in the horseshoe arrangement of the Knesset’s general chamber. The new ministers—some of whom hold no specific portfolio—will not come cheap. For, in addition to the extra woodwork, each will be entitled to a ministerial suite of offices, a full time staff, a limousine and a driver. 


In the weeks following his election victory, Sharon spent a good amount of time meeting with Israeli economic leaders—from both the public and private sectors—sounding them out and getting advice as to what needs to be done about the economy, which today seems headed for recession, after more than a year of impressive growth.  


To a degree, the purpose of his meetings was to calm the nerves of the business community, which was wary of the veteran politician known for favoring big governments. Sharon said little of subtance during these gatherings, but did stress he plans to take a hands-on approach, heading an economic sub-cabinet of ministers. 


According to a report appearing this week in the Israeli Globes financial daily, Sharon intends to appoint a special committee headed by the directror general of his office, which will be charged with reformulating tax reform recommendations, including tax breaks for the high tech sector. Within 40 days, the report said, the committee will have to submit alternatives to an earlier proposed plan, to be implemented at the beginning of the government’s term in office.  


The man in the economic hot seat will be Silvan Shalom. At forty-two years of age, one of the rising stars of Sharon’s Likud party is a man who fancies himself as a future prime minister of Israel. Tunisian-born, Shalom is a trained economist with a graduate degree in public policy. He is also a chartered accountant and holds a law degree from Tel Aviv University.  


Before entering the Knesset, Shalom served as chairman of the board of directors of the Israel Electric Company, and as director-general of the ministry of energy and infrastructure. During Benjamin Netanyahu’s term as prime minister, Shalom first served as the deputy minister of defense, before being appointed the minister of science and technology. He is married to Judy Shalom-Nir-Moses, a television personality and a member of one of Israel’s most powerful media families.  


Shalom, who long aspired to the position of finance minister, has his work cut out for him. His first job will be to get a budget passed, but with that out of the way, he will be forced to tackle an economy that is suffering under the dual burdens of the Palestinian uprising and the collapse of the Nasdaq stock exchange, where most of Israel’s leading high-tech companies are listed.  


The complicated structure of the new Knesset is not going to make his job any easier. In one of his final speeches in office, Israel’s outgoing finance minister, Avraham Shochat, warned that, if the Knesset approves three-billion shekels in private-member bills that are already on the table, the economy will go into a tail spin. Shochat called on Sharon's government to pass the 2001 budget without expanding the deficit. If the government enlarges the deficit, or passes populist private member bills, he said, the economy will revert back 15 years.  


Hours before the government was sworn in, a number of bills were brought before the Knesset for ratification. All were considered hot potatoes, and the chief whips of the larger parties were keen to get them out of the way before they became caught up in intra-coalition bickering. One of these was the 2001 budget bill, which was voted on in its first reading. It had been scheduled for earlier, but had been put off because of the Islamic Eid Al-Adha festival. 


Ordinarily, the budget would have been voted on before the end of previous calendar year. But because of the political situation which Ehud Barak’s government had found itself in December, it had not been able to muster the necessary votes. Indeed, since January 1 the government had been operating on a proportional budget, based on the 2000 budget plan. Ironically, the bill that was voted and passed in its first reading on Wednesday was the same bill that had originally been proposed by Barak’s finance minister, Avraham Shochat. The shifting political sands, it seemed, brought about a change of heart in a good number of Knesset members regarding the viability of Shochat’s original proposal. 


The 2001 budget bill had been formulated before the outbreak in September of the Palestinian uprising, and the economic effects of the unrest will be reflected in the amendments that will be made before its third reading. According to the Jerusalem Post, new allocations will qual about one billion shekels ($243 million). The defense establishment already received a 250 million-shekel advance in November from the 2001 budget, and two billion shekels were transferred to the defense ministry in December, based on government ministries’ surpluses.  


Sharon’s new government will not have much time to get the 2001 budget out of the way. According to Israeli law, if a state budget is not approved by March 31, the Knesset is dissolved, and general elections will have to take place within 60 days. — (Albawaba-MEBG)  

© 2001 Mena Report (

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