When the Israel-Hamas war is won, Israel must adopt a new economic policy.
This was the message delivered on Monday by both Prime Minister Benjamin Netanyahu and Bank of Israel Governor Amir Yaron.
The two were speaking at a ceremony at the President’s Residence at which Yaron was officially appointed to serve a second five-year term, following the signing of the appointment by Netanyahu and President Isaac Herzog.
While Israel’s economy has weathered previous crises, it has never been confronted with a situation such as that which followed the October 7 massacre in southern communities by Hamas terrorists, said Yaron.
Netanyahu characterized Israel’s economy as “a strong ship in a stormy sea” attributing its stability and success to decreased bureaucracy and regulations.
For some years, he said, attempts were made to gradually reduce the defense budget, but given the present crisis, it is urgent to substantially increase it to provide for all of Israel’s defense needs.
These depend on a strong economy, which itself depends on iron-clad security.
“We have to utilize all our resources,” said Netanyahu.
This imperative was echoed by Herzog, Yaron and Finance Minister Bezalel Smotrich.
Netanyahu also emphasized that it was vital for the governor to work with a top-quality professional team, which has been the case over the past five years.
A former finance minister himself, Netanyahu knows a thing or two about economics, and could be seen nodding in approval as Yaron spoke of the challenges to be confronted with the adoption of a new economic policy. At the conclusion of the ceremony he went into a huddle with Yaron.
Smotrich was full of praise for Yaron’s professionalism, knowledge and experience, and he complimented Netanyahu for having made the decision to extend the governor’s appointment to a second term.
Yaron is a second-generation economist. His family moved to the United States following his father Yaakov’s appointment to the World Bank, where he specialized in emerging economies.
The younger Yaron returned to Israel in 1985 to serve in the IDF, and to pick up a couple of degrees at Tel Aviv University. He enhanced his academic qualifications at the University of Chicago. Prior to taking up his present position, he joined the faculty of the Wharton School at the University of Pennsylvania in 2004.
When it was suggested to Netanyahu a little over five years ago that Yaron would be a suitable candidate for Governor of the Bank of Israel, he read some of the papers Yaron had written, was impressed, and remained so.Netanyahu and Yaron are on the same page on matters relating to free market policy.
Although Israel has suffered a severe blow during the current crisis, said Smotrich, Yaron has succeeded in keeping the economy stable.Smotrich was optimistic about the future, saying that he knows of some 140 technology-based start-ups that are in the offing.
Turning to the subject of the war, he said: “People are praying for peace, but are nonetheless determined that this is a war that Israel must win.”
He concurred with Netanyahu and Yaron that there is a critical need to change economic policy, but said that cannot happen until people have a feeling of security.
He credited Yaron with doing what has to be done during a time of war.
Yaron began his own address by expressing condolences to families who have lost loved ones, wishing a speedy recovery to the wounded and return of the hostages.
He also paid tribute to the employees of the Bank of Israel for their dedication and their professionalism.
The highs and lows of Israel's economy
One of the great challenges to the economy is reducing the deficit, he said. Israel had a low deficit during the Covid epidemic, and is now faced with a very high one.
But it is important, he stressed, to state that Israel’s economy is strong, has overcome previous crises, and has a strong foundation.
Even so, he noted, there is a need to develop additional resources, and the government must find a balance between the heavy increase in the defense budget and the other needs of society.
He called technological innovation vital to Israel’s future.
Israel must adapt to clean energy, he said and must encourage more competition in the financial sector, pointing out that no new banks have opened in Israel in 40 years.Commenting that the business model in the financial sphere is changing, Yaron underscored that Israel must move in step with these changes.
He also voiced the wish that after the war, Israel would learn from its past.Herzog focused more on social resilience than economic resilience, saying that he had witnessed this when visiting army bases, wounded soldiers, displaced communities and hostage families, and had seen some amazing innovation along the way.
He lauded Yaron as a man of vision, who with great responsibility had safeguarded the resilience of Israel’s economy.
Herzog spoke of encouraging foreign investment which in turn will provide more employment opportunities, and help revive small industries.
The resurgence of the economy is vital,” he said.
He also pointed out that all Israelis, Jews and non-Jews, share the same fate, and that should be recognized.Later, Herzog and Justice Minister Yariv Levin decided to grant an exemption from fines to people directly harmed financially by the war.
These mostly work in the construction industry, in the army or in other defense sectors. The pardon also applies to families of hostages and is meant to demonstrate appreciation for those who serve the nation.