Rudderless (Hamodia, November 14)

“A week is a long time in politics”, noted Harold Wilson, Britain’s Prime Minister in the 1960’s and 1970’s. If that was true in the days when British politics was fairly stable, then it is infinitely truer in Israel today. So by the time this article is read, at the end of this week, a great deal may have happened along the way.

But even without knowing how this week is going to play out, it is safe to say that in terms of managing the economy, the current government is now part of the problem, not part of the solution. Thus if last week’s column focused on the impact of global developments on the Israeli economy, this week we must assess how the domestic political ‘situation’ — a nice way of saying ‘mess’or ‘balagan’ — will influence key economic issues. Surprisingly, those influences are not all negative.

The starting point is that this government has begun to crumble. At this time of writing, only one minister has quit — and Amir Peretz held a minor post and belonged to a minor coalition party, so it’s possible to pretend that his departure doesn’t signal the imminent collapse of the whole government. However, the historical record shows that Israeli governments are like knitted sweaters — once one thread comes loose and you start pulling, the whole thing unravels very quickly.

To make matters worse, the central component of the coalition, namely Likud, is itself in growing disarray. The party leader — and prime minister — is facing open rebellion from different directions: from the right wing of Likud over his policy toward security issues and relations with the Palestinian Authority, but also from the left, or populist, wing of the party over his socio-economic policy.

And to make matters worse still, the government as a whole seems to be losing control over not just Jerusalem, but the whole country. The most obvious evidence is the wave of violent protests and rioting by Israeli Arabs, but there is other, quieter, evidence as well. The number of public-sector labor disputes and their severity has shot up in recent weeks, as union leaders sense weakness and respond accordingly, initiating action over a wide range of areas, from the ports to the courts.

All of these developments, by demonstrating that the government is weak and split internally, serve as invitations for external pressure as well — with the European Union and the United States the most prominent, but even Jordan has sought to flex its puny muscles against Israel.

In economic terms, the bottom line of these political trends is not difficult to calculate. Decisions are not being made — or wrong and easy decisions are being made instead of the hard ones that are required. Many political interest groups are being bought off with budget allocations, to persuade them to stay on board and not to rock the boat. Planned reforms are being delayed or abandoned, because ministers’ minds are elsewhere. Above all, confidence is being eroded.

Businessmen, even at home but certainly overseas, are unable to make decisions in the face of mounting uncertainty. Planned investments are delayed, and those under consideration are shelved — possibly for good.

Yet, ironically, the crumbling of the government and the absence of clear policies, even the lack of confidence, also have a positive side to them. Firstly, they all help push the shekel lower and, as discussed on previous columns, a weaker shekel is essential for the recovery of Israeli exporters’ sales and profits.

Secondly, if the government does fall in the next month or two and the budget proposal for 2015 is not passed, then the country’s fiscal position will actually be better. The draft budget is a hodge-podge of bad ideas and political compromises; its numbers don’t even add up. Without it, the Treasury will be forced to keep expenditure to the levels fixed in the 2014 budget and all the increases being discussed will have to wait until a new government — hopefully one with stronger leadership and clearer ideas — takes over and drafts a new and more sensible budget, within the framework of a coherent policy.

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