Posted tagged ‘elections’

Covering up election economics in Israel

December 21, 2012

In a month’s time, Israel goes to the polls. Bearing in mind the strict proportional representational system, the trends in the polls and the country’s habit for political coalitions, it seems that Prime Minister Netanyahu will not be moving home after the votes have been tallied up.

Elections around the world are usually decided by social and economic issues. Geopolitics in the Middle East has ensured that most campaigns in Israel since 1948 have been decided on matters related to defence and foreign affairs. However, what if that were not the case? What if Israelis put more emphasis on subjects that concerned the shekel in their pocket? How should the outgoing government be judged?

Since 2008, Israel has ridden out the global financial disasters in relative comfort. The stats of 3-5% growth annually, relatively low unemployment and a stable budget deficit ratio speak for themselves. During the current term of office, the country has been admitted as a full member of the OECD and the Tel Aviv stock market is now in the top ranking. So all is good and nothing needs to change?

Whenever a general election presents itself, the local media is always on the look out for “election economics”. In its simplest form, this means a government announcing a policy – often spending lots of money – in order to secure votes. Now, Netanyahu’s team cannot be accused of that. They have sat tight.

And that’s just the point. The Israeli economy is in urgent need of leadership and direction, but none is forthcoming. Everything is being delayed until after the polls have closed and after a new coalition has been formed. That could still be months away. Meanwhile, the politicians are busy praising themselves and past achievements,

Stanley Fischer, the governor of the Bank of Israel, put the matter out in the open for all to see. There is a gaping hole of 15 billion shekels, equivalent to nearly 4 billion dollars. How will that be tackled? Raising VAT by an additional 1%? Cutting back on child allowances? Cuts in the budgets of government services? According to newspaper reports, all this and more is being considered, but nothing is definitively planned. And so the budget debt will continue to grow.

As for public utilities, many services will announce prices from February onwards, well after the elections on 22nd January. The Electricity Company has been forced for months to buy supplies of gas from more expensive sources, due to crumbling relations with Egypt. Water prices, that have already soared 35% in three years, are due for another hike imminently. And when the middle classes receive their monthly pay cheques in early February, they may notice that their tax brackets have been changed adversely.

So what does this all add up to? The Israeli economy is not broke, but many things need fixing. The current government appears to be saying that it will carry on as normal, although it is obvious that this is short-term posturing. Painful changes will come into effect by Spring 2013, and the average citizens will pay for most of them. However, by then, they will have cast their vote. By default, that is another, yet short-minded and dangerous, form of election economics.

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5 pointers on the Israeli economy

October 5, 2012

Israel is coming to the end of the celebrations of the Jewish New Year. There are increasing signs that a general election will be called for early 2013.As opposed to many countries in the democracy club, Israelis have usually considered security issues as the key determining factor for who they choose at the polls.

However, the social and economic agenda have been paramount in the local media since early 2011. With that background, I thought it would be interesting to put down some benchmarks as the election process kicks off.

1) Credit Rating: Last week, Standard & Poor’s Ratings Services affirmed Israel’s currency at the level of AA-/A-1+. In a period of global instability, that is very encouraging. Despite recognising some short term issues, such as growing budget deficits, the long term outlook is stable if not strong. In particular, the country will begin to benefit from revenues from off-shore gas supplies.

2) Tel Aviv Stock Exchange (TASE): This week, on lower trading, TASE hit a 15 month high. “Although Israeli trading volume shrank sharply  this year, in both relative and absolute terms, its relative performance last  year and over the period since the crash of 2008/09, was better than the global  average.”

3) Foreign Currency Reserves: It is accepted that Israel currently has an unexpected budgetary gap of around 15 billion shekels – almost US$4 billion. In parallel, foreign currency reserves are close to a record high, coming in at US$76 billion. With this security, the country has little problem today raising funds on the capital markets.

4) Israeli shekel: Linked to these developments, the Israeli shekel has appreciated against the dollar in recent weeks. It is now at its best trading position since mid June 2012.

5) Economic growth: For much of the past decade, Israel has recorded annual economic growth rates of 4-5%. The forecasts for 2012 were always much lower than that and there was fear a few months back that the stat would dip towards 2.5%. The latest reports are much more optimistic, as the figure will end up towards 3.3%. Exports to the USA have held up.  The jury is still out for 2013.

It cannot be denied that many food distributors have indicated that they will be raising prices in October 2012. Unemployment is on the move upwards. Budget holes must be filled eventually. Voting intentions will not solely be decided by what is happening around the Middle East scene.

However, the above analysis indicates that Israel’s economy remains fundamentally sound. Let us hope that the politicians find a way to protect this position, even as they set about the electoral ritual of carving each other to pieces.

Israel’s “non-election” economics

May 8, 2012

On Monday night of May 7th, Israelis went to bed believing that they would be voting in a general election by early September. By the following morning, after the Prime Minister had struck a deal with an opposition party, the “blah blah” show had been postponed for until late 2013.

What had happened and how to explain Israel’s coalition politics to an outsider would take more than a simple blog to describe. The effect on talks with the Palestinians, handling Iran, trying to get the trains to run and maybe even on time, those are all issues that I will leave to others to evaluate.

I just want to examine the local economy for a few moments, a matter which Bibi Netanyahu is proud of and is prone to recall his days as Finance Minister. To cut to the chase, Israel boasts an excellent record over the past decade. Even in 2012, growth will end up close to 3%, very praiseworthy compared to many of its international trading partners.

However, there are many problems on the horizon, and now is definitely not the time to play election-economics. For example: –

The indications are that the budget deficit for 2012 is going to end double what had been budgeted, mainly due to lower tax revenues. So there will be little extra money for popular voters issues, which the Prime Minister will seek to distribute.

Now one way to finance a deficit is to encourage people to buy government bonds, and that often requires a higher than normal rate of interest. However, the Bank of Israel is looking in the other direction. And just to ensure that the matter is even more complicated, if interest rates were to be jacked up, then the shekel will rise in value (even more). That in turn will jeopardise the profitability levels of Israel’s exports.

Anything else? Well unemployment that had struck an all-time low of 5.2% a year ago is now forecast to leap to 6.7%. There is growing concern about the increasing gap between the haves and have -nots. And the government is refusing to challenge interest groups; farmers, who prevent competitive imports, or unions at the ports, who keep import duties high, or the Electricity Corporation, which allows pays the bills of its employees.

And where is the government in all of this looming economic concern? Well, so long as the power brokers in Jerusalem strike another deal to put off elections and keep shtum, I guess that nothing too catastrophic will happen to the folks at the top.

Israel’s naked leadership

March 15, 2009

There’s an old joke in Israel. It takes 3 months to decide on a date to hold an election, 3 months to campaign, and 2 months to form a coalition. And when that is over, it is nearly time to start the circus all over again.

So while Bibi Netanyahu has been dallying around, trying to create a government based on a solid majority of 1 – or is it 5 – votes, the country has calmly gone through a series of crises. Hamas continues to send rockets into population centres. Stanley Fisher, the Governor of the Bank of Israel, is predicting the worst economic scenario in the country’s 60 year history. The Obama administration is looking increasingly hostile. etc etc.

Is Bibi the man to save the country? So far in coalition negotiations, he has surrendered several top portfolios to Avigdor Lieberman’s party, even though they received barely half the number of votes as him. Not a good omen for when the PM has to handle Palestinian or American pressure.

If only it would end there.

It is my wife who pointed out with pointed despair and disgust that neither Lieberman nor any of Bibi’s potential partners have sought the economics or education portfolios. She correctly observed how most people go into politics ostensibly to change things. And where better to make a mark on society than through these two ministries?

But in Israel, after over half a year of jockeying and puported idealism and electoral holier-than-thou comments, nobody at the top has the combined courage and ability to make a stand. These two jobs, which urgently need people of calibre, are being shunned by potential cabinet members.

What the hell did these people fight an election for?

Israeli economy and general elections

February 12, 2009

Israel has voted. The results are in. And the financiers reacted by causing a 2.6% drop in the Tel Aviv Stock Exchange (TASE). They don’t like change, especially when political uncertainty remains in the air.

Now look again.

Despite the fall, the TASE has still risen 5.36% since the beginning of the year. And there was a war going on as well for much of the time.

Some of the Israeli companies listed overseas are also being sought after. In the healthcare sector, Teva’s continuing success is well documented. Card Guard is located in Rehovot and has a strong reputation for devising remote patient monitoring systems. 

On the internet front, Michael Eisenberg recently identified 3 Israeli companies that may be well positioned to take off financially; Incredimail (MAIL), Answers.com (ANSW) and Babylon (traded on TASE: BBYL).

On more fundamental issues, the local papers remain full of pessimistic news about high tech companies going on to a 4-day working week. Yet on a rainy election day itself, most of the shopping malls were packed. Many reported a 200 – 400% increase in normal trading volumes. That spending power came from somewhere.

I don’t hold positions in the companies mentioned. I was not shopping on election day. Yet, while I recognise that 2009 will not be a pretty year for everyone commercially, there is still a lot of business out there in Israel.

Israeli Democracy vs Palestinian Human Rights

February 10, 2009

Israel goes to the polls today. 33 parties to choose from – green, Jewish religious, Arab, pensioners and the usual lot – they are all there competing on the basis of strict proportional representation.

Each election throws up its own irony. This year, when the winter rains have been almost non-existant, it is puring down as I write. Maybe this will put off a few people.

The non-Jewish voter is never short of choices. For example, the Druze are represented on many of the lists of the major parties. The Balad group and others, openly and consistently critical of Israeli governments, are trying to encourage their supporters to turn up and vote.

What is undisputed is that everyone has a right to one vote and cast is freely.

Palestinians can look on with wonder. , Hamas continues is rule by threat and violence. The Palestinian-run Independent Commission for Human Rights reported in a press release on February 8th that yet another Palestinian has been tortured to death by Hamas in a Gaza hospital.  Jameel Shafiq Shaqqura was 51, and heralded from Khan Yunis. In a separate incident, UNRWA has finally convinced Hamas to return supplies that were stolen in broad daylight.

No doubt, the result of the election will produce yet another coalition government. Weak or strong, right or left, whatever its formation, today confirms yet again that Israel resides firmly in the camp of pluralistic, democratic societies.