Prime Minister Ariel Sharon: Cuts will not be easy, but in order to grow, we must now act responsibly

Jerusalem, December 23, 2001

(Communicated by the Prime Minister’s Media Adviser)

Prime Minister Ariel Sharon on Sunday, December 23, 2001, held a press conference on economic policy with Finance Minister Silvan Shalom and Bank of Israel Governor David Klein. The following is the translated transcript of Prime Minister Sharon’s speech:

Citizens of Israel,

Leadership requires determination, responsibility and courage. Whether we are asked to demonstrate these qualities on the battlefield, or whether we are asked to demonstrate them on the minefield that is the economy. Whether the required decision is to lead the troops from defeat to victory, or whether it is our task to lead from an economic slowdown to growth.

We must courageously look into the eyes of the people and say: this is the situation, and this is the course. We require courage to make decisions, even, occasionally, unpopular ones. We require determination to face the demands, justified as they may be, and to say: today, there is none.

Citizens of Israel,

We have political strength and security strength. You know this because it is due to you that we have this power. Today, we also need economic strength and, only with you, only together, can we achieve this goal.

The Israeli economy is now experiencing a severe recession. It is clear to us all that the acute crisis that has befallen the international economy – a crisis that has only intensified since the terrorist attacks in the United States – is directly impacting upon the Israeli economy. The security situation in Israel, stemming from the war of terrorism forced upon us by the Palestinian Authority, has exacerbated our economic predicament.

But, citizens of Israel, let us not make any mistake. Economic recession is not a decree from Heaven. We can and must emerge from recession to lead the State of Israel back to the path of growth and economic strength.

The way to growth is not easy. The recovery will be painful, as it is all over the world. But in order to recover, treatment must begin immediately. It will not be simple or short, but I can promise you that it will steer Israel onto the right path of prosperity and strength.

The primary objective of my government’s economic policy is to re-stimulate growth, while preserving economic stability. To this end, we must now implement a number of measures.

In the wake of the international economic crisis following the terrorist attacks in the United States, the leading countries of the world have revised their growth forecasts. In Israel, we have also decided to adjust our growth forecast for the coming year from four percent to two percent. At the same time, we have decided to guarantee that the budget deficit, the overdraft of the State of Israel, does not exceed three percent.

The adjustment of the growth forecast obliges us to cut over NIS 6 billion from the government budget. The cut will not be easy, but in order to grow, we must now act responsibly. If we do not act accordingly, we will be forsaking the future of the Israeli economy.

Within the framework of the economic program, we will concentrate the cuts in spheres that do not contribute to growth. At the same time, we will increase, by as much as possible, government budgets in areas that stimulate growth.

We will freeze all privately proposed acts of legislation. In this framework, we will also freeze the Negev Law and the Large Families Law, whose cost exceeds NIS 1 billion. I have supported these laws in the past, in times of economic plenty, but the situation is different today.

We will freeze certain budgets, and be unable to expand them. I call on Members of the Knesset to demonstrate responsible behavior, and to revoke the decision to enlarge their expense budget. We who have been elected by the public must be the first ones to set an example.

In order to stimulate growth, the government will refrain from raising taxes. At the same time, we will enact a series of measures designed to enhance the incentive to work among the unemployed. We will also reduce unemployment by replacing foreign laborers with Israeli workers, even in those professions in which Israelis do not enjoy working.

Citizens of Israel,

This year’s State Budget will be tough. But tough will not be sufficient.

My government cannot ignore the needs and real troubles of parts of Israeli society that, beyond any cuts, beyond any program or streamlining, are entitled to live in dignity. These troubles will be given specific attention in the State Budget, and we will do all everything in our power to assist and respond to the minimal needs that are essential for the sustenance of those who go without.

The aim of the government’s policy is to ensure the re-stimulation of growth while maintaining stability. If we succeed, we will be able in next year’s budget to resume the increase of budgets intended to improve the welfare of the entire public.

Here with me today are my partners to the economic program. Minister of Finance Silvan Shalom, and the Governor of the Bank of Israel, Dr. David Klein. I have consulted with the finest economic minds in Israel as well as with many other experts. There were also proposals to arrive at a gradual solution, but in light of the difficult situation, I decided to act in a sharp and transparent way. The worst thing is to deceive ourselves.

The decision of the Governor of the Bank of Israel to reduce interest rates by two percent, and the decision of the Finance Ministry, with my full support, to give the Governor the necessary monetary tools to implement his policy, emphasize the importance we attribute to the independence of the Bank of Israel in conducting monetary policy. The Bank of Israel will continue to conduct a monetary policy that will ensure the stability of prices, and support as much as possible the government’s economic objectives, including growth and employment.

Last Sunday, the government approved the proposals of the Finance Ministry, which I supported, to cut over NIS 6 billion from the State Budget. Tomorrow, the government will convene to approve the cuts in each and every ministry. I call upon all the Ministers to lend a hand and approve the proposed cuts. I know that each of you bears responsibility for his ministry, but let us not forget that, together, we share responsibility for the entire country.

The economic policy of the government will ensure the fair and just participation of all strata in society, and the achievement of the goals that we have set for ourselves.

Citizens of Israel,

It would have been easier for me to come here today and give to everyone. It would have been easier for me to come and say – there is from where. But I love this land and I love this nation. So today, I must – we all must – do the right thing.

I know the Israeli public. I know the people of Israel. I know us. And I know that as difficult as it may be -we will confront this together, we will work together and, together, we will bring the State of Israel to plenty and economic prosperity. I am convinced that the strong foundations of the Israeli economy will allow us to return to sustained growth. This is the time to unite together and get started.

Thank you.