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RATIONAL page 69

It is possible that such a cut
will suffice, or that we won't need
to cut at all or even that it will be
too small.

The previous government
inherited a $200-million cur-
rent-account surplus and be-
queathed to you a $5.1 billion
deficit, mainly due to the '94
supplementary budget and
public-sector salary hikes.
Don't you think much of this
wrong has yet to be righted?
Perhaps you should have
slashed spending the day you
entered office?

This is really a hypothetical
question today. For example, the
Bank of Israel recommended
then [immediately after the elec-
tions] a cut of about $3 billion. In
the end, you see how much more
we had to cut; no one anticipat-
ed this magnitude.

'97 BMW 318ti

Didn't your decision to re-
tain all the senior Treasury
officials who allowed the pre-
vious government's excessive
spending send the markets a
business-as-usual message?

'97 BMW 328ia

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We must return to the in-
dividuals. Outgoing Treasury
Director-General David
Brodet and Head of the State
Revenue Administration
Tsipi Galyam, for example,
played a central role in all
that transpired here prior to
your arrival.
Without us judging them,
from your perspective, why
keep officials who were part
and parcel of a policy you ev-
idently opposed?

JACQU ELINE ARZT/MEDIA

Let's not talk about individu-
als. The deficit's real dimensions
became apparent only when we
came to power in June; by July,
the '96 deficit was already high-
er than the forecast for all of

To do what's right isn't neces-
sarily to do what's popular. We
also instituted a small cut in 1996
and a 2 percent reduction in civ-
il-service manpower. In my opin-
ion, we did the right thing from
an economic perspective, but not
from a psychological one, since a
long time passed between the
cabinet decision in July and the
final legislation at the Knesset in
the closing days of the year.
In politics, that's a very long
period of time, which indeed al-
lowed a groundswell of opposi-
tion. Still, despite the attempt to
grind us down, we withstood the
opposition and implemented an
additional cut in November.
This was not just because NAIQ
wanted to fight, but simply be-
cause it became apparent that
the situation had deteriorated.

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Finance Minister Dan Meridor

1996. At that point we asked
whether we should cut immedi-
ately or only in 1997.
Administratively, we should
certainly have cut immediately,
and thus achieved the optimum,
but considering various legisla-
tive problems, it was best to wait,
and to do it in an orderly fashion,
with the introduction of the 1997
budget.

I know Brodet,
his ability and his
understanding of
the economy. For
decades he has
been a major con-
tribution to the Is-
raeli economy.
Within my first
couple of meetings
with him, he told
me that he'd in-
formed Baiga [pre-
vious finance
minister Avraham
Shohat] of his in-
tention to leave
early in 1997. I did
not ask him to
leave, though I re-
spect his decision
[which becomes ef-
fective next
month].
If I commit a
mistake now, I'm
the one who is re-
sponsible, not my
staff. I don't believe
the problems here
were the fault of the
senior officers. I accept Brodet's
approach to economics.

Lees turn to the public sec-

tor.

You know, I said to Baiga back
in '94 or '95, 'You are leaving for
whoever ends up replacing you a
fine economy except in three ar-
eas: wages, pensions, and the col-
lective labor agreements,' where
he broke previously ironclad con-