Israel economy back on agenda after elections

Once a government has been formed Benjamin Netanyahu will need to start paying attention to the problems affecting the economy

With almost all the votes counted in Israel's election, prime minister Benjamin Netanyahu looks likely to hang on to his job for a third term.

Mr Netanyahu may have expected a smoother ride back to power when he called the poll a few months back, and despite the likelihood of him remaining the country's chief minister, his power will depend on a far wider range of political views than was expected, particularly over peacekeeping.

In the build up to the vote, one commentator coined the phrase: the "weird elections".

That, though, referred to the scarcity of pre-election debate focused on the country's economy.

It is true that, compared with the most developed nations, Israelis have less to complain about when it comes to economic matters.

Last year's gross domestic product (GDP) growth of 3.1% was the slowest since 2009.

Still, it was respectable, especially given the slowdown in the US and Europe, its two key export markets. Meanwhile, official figures suggest unemployment is below 7%.

We are not hungry - we have food in the refrigerator - but it's really frustrating to work every day and never get out of the situation where you are”

Hannie Ricardo Music teacher

But it is only 18 months since Israel saw its biggest ever economy-driven protests - when a short-lived mobilisation of the country's middle class brought hundreds of thousands of people to the streets of Tel Aviv, Jerusalem and elsewhere wanting more free education, affordable housing, cheaper food and an end to rising taxes.

'Soap opera'

Those issues have not gone away, according to Eran Yashiv, associate professor of economics at Tel Aviv University who agreed with the "weird elections" definition, saying that an opportunity had been missed.

"Attention has been diverted to squabble between politicians and parties, the kind of thing more fitting in a soap opera.

"Although in the short term Israel is okay, growth is reasonable, inflation is low, the debt levels are fairly good, there are long-term, deep, structural problems that need addressing," Mr Yashiv said, pointing to a need for better infrastructure and increased participation in the workforce, especially among Arab women and ultra-Orthodox Jewish men.

"One reason economics have not been high on the agenda is that governing parties and the prime minster don't want it to be. Given the social protests of summer 2011 it was not in their interests to promote the discussion of economic issues."

'Pushed down'

Music teacher Hannie Ricardo joined those protests, hoping the action would help usher in a better future for her and her three daughters, but says that optimism quickly faded land that life had got no better.

Her rented home, about an hour's drive from Tel Aviv, is tastefully if not lavishly decorated - and the piano and family laptop suggest this is not a family with the same dire concerns as many of those who protested in other parts of the Middle East. But regardless, her dissatisfaction is evident.

"There's a huge amount of middle class people - who are working, who are happy, but there are all these taxes and rulings that are pushing us down," she says.

"We are not hungry - we have food in the refrigerator - but it's really frustrating to work every day and never get out of the situation where you are - and by that I mean we have to take loans and more loans just to be able to finish the month.

"It's hard because you see the injustice around. If everyone was like this then you'd think 'Okay, this it the situation.' But it's not. You see others grow bigger and stronger and the rest just disappear."

'Big mistake'

Ms Ricardo's may not have been issues widely voiced during the campaign.

A person with right-wing views will always vote for right-wing parties, a person with left-wing views will always vote for those parties regardless of the economy”

Eran Yashiv Tel Aviv University

But economics eventually hit the headlines in the days before the vote when it emerged that Israel's budget deficit had grown to 4.2% of GDP in 2012 - twice the level predicted a year earlier, in essence because revenue from taxes had fallen short of predictions.

For businesses this was ominous, said Williger Joseph chairman of Willi Food, whose warehouse in Yavne to the south of Tel Aviv is piled high with tinned, canned and bottled produce for distribution across the country and beyond. Coconut milk from Thailand, tortillas from Spain, oil from Greece all help this firm make a healthy profit.

Mr Joseph argued businesses were already doing more than their fair share to keep Israel's economy healthy.

Pledges to trim corporation tax had been reneged on and had instead risen to 25% from 24% last year he complained, pointing to a further rise to taxes due on share dividend payouts as more evidence the companies were being targeted.

"I start to suspect the government will raise taxes again after the election," Mr Joseph said.

"This is the easiest way but I think this will be a big mistake. What encourages the economy and encourages the private sector is the opposite. Not raising taxes. When you have to pay more tax instead of encouraging business you do the opposite."

So why, despite a range of dissatisfaction with the economy, did the election play out with a fair degree of predictability?

According to Eran Yashiv of Tel Aviv University, that was because whatever is on their economic wishlist, the overriding concern of voters here typically lies elsewhere.

"A person with right-wing views will always vote for right-wing parties, a person with left-wing views will always vote for those parties regardless of the economy," he said.

"So, for example if a Likud supporter, who could be a poor or lower middle class person, disliked a Likud economic policy and would rather see change, that person is still likely to vote Likud because of its position on Iran, the Palestinian issue and its relation with Arab countries."