Having faith in the holy economy

One anonymous financial expert and blogger sees Israel’s housing market heading for a crash, taking the rest of the economy with it.

There are near daily comments in the Israeli press, arguing in parallel whether the financial mandarins are getting the real estate market right or wrong. Is it a bubble or not?

To judge from one anecdotal piece of evidence, the answer is that the banks confident that they are in control. Only today I was informed that two leading finance houses were fighting each other to grant a large loan to be secured against a significant piece of land. Certainly, not everything is rotting in the garden.

Yuval Steinitz is the current Minister of Finance, whose Jerusalem office is a brief drive away from the Holy Sites in the city. He can boast of a doctorate in philosophy, but has a limited background in economics. And yet, he is sitting fairly pretty at the moment. After all, even the most conservative estimate put growth in 2010 at over 3%.

An interview in a weekend paper demonstrates that Steinitz is aware of potential pitfalls. But for him, real estate is just one of several structural issues that are being actively tackled. For example, the government is ensuring that more flats are available to first time buyers, while mortgages regulations are being tightened.

Elsewhere, more investment will be placed to encourage the ultra orthodox and Arab communities to enter the workforce, when historically this has not been the situation. In order to address the “brain drain abroad”, high tech will receive more benefits, especially regarding the employment of local talent. The ministry of defence will have to justify financially new large programmes.

Steinitz also mentione that protection of pension plans, tax benefits for industry and other sacred cows are all being revisited. The aim is to ensure that the base structure of the economy matches the needs of the country over the coming decade. 

In the next few days, Israel will officially become a member of the OECD. It is a club that Israel deserves to be part of, now and in the future.

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