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transfer abroad funds for salaries and
operating costs.
The fourth involves slashing the budget
by around $350 million, the main targets
for cuts being defense, education and
health. According to the plan, this will be
achieved in large measure by forcing
government departments to streamline
their operations, cut waste and reduce
bloated workforces.
Finally, the reforms aim to gradually
transfer many state companies and state-
run services to the private sector and to
seek a national consensus on restraining
wages and prices.
Inevitably, the proposed reforms created
a storm of protest, with Histadrut secre-
tary-general Yisrael Kessar complaining
bitterly that it was "a program to make the
rich richer."
The unions threatened a general strike,
while many politicians raced to demand
compensation for groups hardest hit by the
scrapping of tax exemptions — middle-
income wage-earners, the thousands of
Israelis who are exempt from income tax
(such as residents of development towns),
working mothers, recipients of child
allowances and old-age pensioners.
Defense Minister Yitzhak Rabin warned
that the Treasury had already cut deeply
into the flesh of his ministry and that fur-
ther defense cuts would seriously threaten
Israel's ability to maintain a qualitative
edge over the rapidly expanding armies of
the Arab world.
Education Minister Yitzhak Navon also
sounded a dire warning: further cuts in
education could push Israel's hardpressed
universities into an irreversible decline and
jeopardize the quality of education avail-
able to future generations.
Other ministers offered forecasts about
declining living standards for Israel's least-
privileged sectors and falling standards of
health care.
While opening the economic reforms up
to debate, Finance Minister Nissim has
made it clear that while minor adjust-
ments to the program may be possible, the
essential elements — lower tax rates, a
reformed capital market and a drastic
budget cut — cannot be compromised.
"Sacrifices today — including the forego-
ing of privileges — are necessary in order
to generate a better future," he declared.
"If there is a lesson to be learned from
the experience of countries such as Israel,
it is precisely that an open economy,
without undue intervention, enables in-
creased productivity and full utilization of
potential."
The choice, as one commentator put it,
is "between America. and Albania."
Late this week, Israel's political leaders,
trade union officials and employers' repre-
sentatives appeared to be close to taking
the first tentative steps in making that
choice when they agreed on a package of
Israeli Finance Minister Moshe Nissim: Nothing less than
an economic revolution.
economic measures.
These involve reducing the top tax rate
from 60 percent to 48 percent, slashing the
budget by some $300 million, and restruc-
turing the capital market to encourage
greater investment in the private sector.
Formal ratification of the agreement,
however, encountered a last minute
obstacle when the Histadrut trade union
federation insisted that its price for
cooperation was a massive infusion of
government funds for its ailing Kupat
Holim health insurance organization.
But even signing the agreement, which
falls short of the finance minister's original
goals, would only be a start. The ultimate
success of the plan depends on implemen-
tation, and that involves all three parties
— the government, the employers and the
unions — playing by the rules.
So far, the signs are not encouraging:
-both the education and health ministers,
the two principal victims of the diminished
budget, have already expressed their deter-
mination to fight the cuts.
Health Minister Shoshana Arbeli-
Almoslino has threatened to defy the
government and simply ignore the new
measures, while teachers immediately an-
nounced that they would strike, with
Education Minister Yitzhak Navon joining
in their cries of outrage.
Equally Critical to the success of the new
plan is the ability of Israel's employers and
workers to exercise a large measure of un-
characteristic restraint.
On these two groups falls the respon-
sibility of preventing a repetition of the
prices-and-wages spiral that two years ago
led to triple-digit inflation and brought the
country to the brink of economic and social
collapse. ❑