 |
We are all very concerned about the recent financial crisis and collapse of confidence in Wall Street and Banks around the world! The “blame” game has begun with great intensity, and the anger of citizens is very strong and growing. What has happened in America also affects our only democratic ally in the Middle East - ISRAEL! Here are some comments from Israel’s leadership about what is expected to happen:
As the American financial sector heads into a downward spiral; what effect will it have on Israel? Avichai Snir of the Bar-Ilan University Economics Department gives some idea about this international problem:
Snir indicated that the first sector to take a hit from an economic slowdown in the U.S. will be Israel’s active world-class high-technology sector. Demand for the Israeli technology products will be cut, he explained. Also in line to take a beating will be the financial sector, Snir added. He noted that Israeli businesses, like others the world over, will also find it harder to get credit overseas, especially in America.
“Israelis hope for many more tourists,” Snir said, “but it’s not clear if that’s going to happen in the current crisis.”
Asked about the current condition of the Israeli economy, Snir replied, “At the moment, the Israeli economy seems to be in a good position. We started the crisis being in a very good position - partly because the Israeli financial market has never really adjusted to the new market conditions, so the Israeli financial market is still way behind what happened in the U.S. and Europe. The financial sector in Israel is very old fashioned and so it isn’t as exposed to what’s going on in the world. In addition, the Israeli economy has enjoyed very healthy growth in the last four or five years.”
Israel’s economic growth and foreign investment gives Israel some breathing room at the time of the current crisis, Snir explained. However, he added that if foreign investors begin to withdraw their funds, then Israeli companies that depend of that infusion of capital could end up facing a crisis.
Despite the relatively strong Israeli economy, Snir warned, “The recession will come, no way around it.” There is nothing the government can do to stave off the blow, he commented, except in devaluing the shekel in relation to the U.S. dollar to benefit exporting firms.
Opposition leader Binyamin Netanyahu of the Likud party called Monday for government intervention to protect Israel from an economic downslide. Speaking at a Likud conference in Tel Aviv, Netanyahu said, “A free market is not free of limits.”
While a free market economy does not always require government intervention, the economy can reach “extreme situations” requiring the government to step in, Netanyahu said. “We’re in a crisis right now, and we need effective policies.”
Netanyahu gave examples from his own political past, saying, “In 1996 and in 2003, we took action that led us to growth.” However, he implied that the current government would be incapable of taking such action, adding, “But those actions were taken after the government won the elections and was clearly stable.”
Experts have expressed confidence in the stability of Israel’s financial institutions. Regulation has kept Israeli banks from some of the risky investment practices that led to the downfall of major United States institutions, they say. However, the affect of the crisis was clear on Monday as stocks on the Tel Aviv market continued to plummet, reaching their lowest point in more than two years.
European Union leaders are meeting in France this week to discuss the global financial situation and to attempt to calm investors. EU officials said leaders would consider giving financial aid to European banks in order to preserve economic stability.
The International Monetary Fund and the World Bank will hold their annual meetings next week, when they will discuss the global financial crisis. Bank of Israel Governor Dr. Stanley Fischer will head an Israeli delegation to the meeting.
