Israeli PM addresses poverty and other pressing socio-economic issues

(Translated by the Prime Minister’s Office)

This gathering of the Caesarea Forum, here in Haifa – in a demonstration of identification with the north, and as a salute to the impressive and moving resilience of this entire region during the Second Lebanon War – is the best proof that this forum is not cut off from what occurs in Israel.

Even when it outlines the macro view of Israel’s economy, it does so not only with a clear and investigatory point of view, but also with an attentive and caring heart.  I appreciate this very much and thank you for your decision to gather in Haifa.

I wish to say a few words regarding the stability of Israeli society.  Clearly, economic stability is not a goal unto itself, but rather a component in the building up of national strength, which will secure that which is truly important – the future of the people of Israel in its land.  National strength has several components, and one of the most important is the robustness of our society.

Israeli society is very heterogenic.  It comprises native-born Israelis and new immigrants from over 100 countries and 100 different cultures; it comprises Jews and Arabs, and among the Arabs are Christians and Muslims, while among the Jews there are Haredi and secular; there are poor people and rich; residents of the center of the country and those who live in the periphery.

An infinite number of dividing lines intersect the population here in Israel into publics and sectors, which together form the mosaic of Israeli society.  All these dividing lines supposedly threaten its cohesion, the feeling of basic togetherness and partnership.  One cannot speak of true cohesiveness between the extremely rich and the disadvantaged poor.  This is why the issue of poverty in Israeli society is so worrying, but even more worrying is the dimensions of inequality.  According to the Gini Index, our country has more inequality than any Western country: 0.39 compared to an average of 0.31 in developed countries who are members of the OECD.

Therefore, this Government has declared a campaign to reduce poverty, and announced steps designated to deal with some of the more difficult ills of Israeli society at the root. 

The National Economic Council, headed by Prof. Manuel Trajtenberg, together with the Ministry of Finance, the Bank of Israel and other government offices, has already formulated a socio-economic agenda for 2008 through 2010, titled “Reducing Poverty While Encouraging Growth”.  For the first time, the plan includes socio-economic goals, which will be combined with the existing macro-economic goals – the inflation target and the target deficit.

The first goal is reducing the incidence of poverty to 17.2% from 20.2% by 2010.  This is an average annual decrease of 1% in the poverty rate over the years 2008-2010.  Meeting this goal will raise 60,000 families above the poverty line, i.e. approximately 242,000 people, of which 115,000 are children.  This will return the rate of poverty to the same level it was a decade ago.

The second goal is increasing the rate of employment of people aged 25 to 64 to 71% by the end of 2010, compared with the current rate of 68%.  This is an average annual increase of 1% in the rate of employment over the years 2008-2010.  Meeting this goal means that over 92,000 new employees between the ages of 25 and 64 will join the work force, and raise the rate of employment in Israel to the average level in developed countries around the world.  This will add 1.3%-2% to the GDP (which is NIS 8-12 billion), and lead to a significant increase in the State’s income, as well as a savings in allowance payments.

To achieve these goals, a variety of economic and social steps will be taken, including:

– Encouraging productivity and innovation in traditional industries and services.

– Treating centers of poverty in two more affected sectors of Israeli society – the minority sector and the Haredi sector.  These sectors constitute one-quarter of the population, and 55% of all poor people in Israel.

– Providing individual tools for integrating into employment in a more efficient method and manner than in the past: negative income tax, enforcement of labor laws such as minimum wage and overtime – in order to prevent the situation which currently exists where employees continue to suffer poverty despite being employed.

– A further reduction in the number of foreign workers.

– Making allowance payments more efficient.

A significant contribution to increasing the feeling of cohesiveness between different sections of Israeli society will be made by bringing the peripheral communities closer to the center of the country. 

What has been occurring over the past few years in the fields of infrastructure and transportation can be considered a revolution.  This is a plan which is materializing in the form of large-scale investments and connecting the peripheral communities in the south and north with the center of the country, with the business and economic heart of Israel.  This revolution is being achieved through an expansion of the road network, the construction of new landing fields, and primarily through an unprecedented accelerated development of the national rail system.

These new train tracks and roads bring passengers to the periphery, and also connect employment and business centers, which fundamentally changes not only their image, but also the economic and employment reality in which they operate.

The geographic distances in Israel are small.  The main distances are “mental”, and the new network of train routes cancels these “mental” distances.  They are distances of image, between cities which used to be far-off development towns and the large centers of Israel, Tel Aviv and Jerusalem.

We always say that children are our future.  What kind of future can we promise our children, and what future can we promise ourselves as a society, if we do not assist 330,000 of them to avoid the risks they face?  To deal with these questions, I decided to deal with the population of children at risk, as well as the population of toddlers in Israel, in a systematic and organized way.

I believe that, within two years, we will fully realize Prof. Hillel Schmidt and his Committee’s report, which examined the situation of children and teens at risk.  I instructed the professional system to immediately implement the Committee’s recommendations, while allocating resources in the amount of NIS 400 million in 2007 and 2008.  I intend to see that these recommendations are implemented, while at the same time expanding the framework for dealing with children from birth to age 6, a first step in resolving our social problems and dealing with the problem of poverty in Israeli society.

At the same time, the Government will act to upgrade education in the State of Israel at all levels, including implementing a comprehensive reform in training for teachers and resurrecting trade schools.  We have already reached an agreement with the teacher’s union to implement the reform of the education system.  The agreement includes a significant change in teachers’ patterns of activity, while implementing a dramatic revolution in their pay scale.

A special effort will be made to advance higher education in Israel, in accordance with the reform formulated in the Shohat Committee.  We must return Israel’s academic world to the top of the global field.  We cannot allow less than this for ourselves.

Ladies and Gentlemen,

Social strength is not an abstract concept.  It is something very concrete which is tested in times of crisis.  Over the last year, the strength of the Gaza Envelope communities, headed by Sderot, has been sorely tested.  This is the difficult test of terror, of Kassam missiles, which, by harming innocent citizens while manipulating the sensitivity of its residents, seeks the surrender of Israel.  This sensitivity is also exploited by kidnapping our soldiers, negotiating for information regarding their condition, and the release of recorded statements which are dictated.

That fact that the terrorists are demanding the release of hundreds of murderers in exchange for the release of Gilad Shalit says everything about the difference between our attitudes towards human life.  We are not ashamed of this sensitivity.  We are proud of it, but this does not mean we will give into blackmail.  Sensitivity to human life does not mean weakness.  We will consider our steps cautiously, while balancing between the desire to secure the swift release of Gilad, Udi and Eldad and the need to protect Israel’s other interests.

The same is true with regard to shielding homes in the Gaza envelope.  Answering this demand to shield all structures in the Gaza envelope region with maximal shielding will be, in my opinion, the wrong step, just like answering the demand to resolve the Kassam problem in Sderot by erasing Beit Hanoun and other villages in the Gaza Strip from the face of the earth.

If we invest all defense resources in shielding, this will necessarily come at the expense of other vital security needs.  The country cannot completely shield itself, because there is no end to it.

Shielding houses is meant to increase the feeling of security among residents of the area, and indeed the Government is working to this end in a measured way in regions suffering missile attacks.  However, the feeling of security is comprised of more than just thick concrete walls.  It is built on a safe future, a strong economic situation, good health, a promising horizon for the children, a quality social environment and a community without violence.

The steps we have taken, and will continue to take are meant to achieve all this, thereby increasing the feeling of security of every resident of Israel, including the residents of the Gaza envelope.  We must tell the residents of Sderot and the Gaza envelope frankly: we cannot, in the short-term, provide you with all the personal security we would like to provide. 

Life in the State of Israel involves a certain security risk, and whoever chooses to live in the Jewish State takes this risk upon himself.  This risk is still immeasurably lower than the risks and dangers posed on Jewish existence anywhere else in the world.  We expect the residents of Israel to remember this, and demonstrate that same ability to stand up to risks and dangers which the people of Israel demonstrated for the 60 years of Israel’s existence, and under much more difficult circumstances.

We can expect our leaders and the mass media to demonstrate responsibility, rather than encouraging – even through silence – claims which no normal government could accept.

Ladies and Gentlemen,

According to most forecasts, 2007 will be the fourth consecutive year in which the Israeli economy will experience a growth rate of over 4.5%.  The Bank of Israel’s forecast predicts 5.1% growth.  In fact, growth in the first quarter of 2007 was 6.3% in the annual rate. 

Unemployment continues to drop.  The unemployment rate in April 2007 was 7.9%, the lowest it has been in the past 10 years, since 1997.

The impressive surplus in the current account of the balance of payments was maintained.  Last year saw a record high of $6.8 billion, and in the first quarter of 2007 the surplus was 1.7 billion, i.e. the same annual rate.

Inflation remains extremely low, while at the same time, there was a significant increase in foreign investment in Israel, both financial and direct.

The rise in the Israeli stock market continues.  This, together with the continuation of foreign investment, bears witness to the fact that investors predict that existing growth will continue.

The performance of the Israeli economy in times of crisis is testimony of impressive resilience to shocks, especially compared with other countries.

We will continue with a policy of fiscal responsibility, inter alia to lead to a gradual reduction in the debt/GDP ratio to a level of approximately 60% of the GDP in the long term.

In 2006, we reached a national debt rate of 86.7% of the GDP, compared with 102% in 2003, and the estimation is that there will be an additional reduction in 2007.

Reducing the debt will free up financial resources for the private sector in the credit market, and in the long-term, will reduce the interest rate in the economy.  This will lead to a significant easing of the financial burden on households, primarily with regard to mortgages.

I wish to end on a personal note.  Almost every day, our lives move about in a storm of emotions, significant external threats and domestic arguments and quarrels.  Sometimes, we lose all perspective, and slide into unjustified confrontations, both in the relations between an individual and society and in the general public atmosphere.

It is true that it is not always easy, and sometimes the excess threatens to upset the desired balance in life.  However, it seems to me that we are mature enough to stop complaining ceaselessly and flogging ourselves and our fellows with an insatiable greed.  We can look ahead, beyond the thick forest which threatens us, and see the light and hope, the chance and opportunity, knowing that it is in our hands alone.

Thank you.