Israeli Elections: Coalition Economics
Along with the political rejection of the hard right, the electorate also repudiated Thatcherite, or free market economics, along with the man most closely identified with it, Binyamin Netanyahu. Even within Netanyahu’s own Likud Party, there was much grumbling from party loyalists about the pinch of Netanyahu’s economic policies, despite the fact that they brought about rapid economic growth and job creation.
Labor Chairman Amir Peretz will almost certainly demand the Finance Ministry portfolio. If he receives it, as also seems likely, expect the Israeli economy to enter the doldrums. Peretz understands nothing of economics, and what he thinks he understands is all wrong. His nostrum for the socio-economic divide – an increase in the minimum wage – would do little for the poor other than cost many of them their jobs. As leader of the Histadrut, Peretz wreaked havoc on the economy through many strikes, almost all of which were called to protect the perquisites of higher-paid government workers.
Those parties most likely to join the government coalition – Labor, Shas, and the Pensioners — will all present Prime Minister Olmert with an expensive wish list. All three campaigned primarily on socio-economic issues. Where the money will come from to meet their demands is not immediately obvious. Settling with the Pensioners, who entered the Knesset for the first time with a bang (seven seats), means less money will be available to meet Shas’ demands for Torah education and the return of some of the cuts in child support.
After navigating through all of the above, Olmert has also proposed a massive West Bank evacuation. As already mentioned, it is far from clear where all this money will come from.