Israel Finance Ministry Loses Top Aide Amid Housing Protests

The director general of Israel’s Finance Ministry Haim Shani resigned after a series of disagreements with Finance Minister Yuval Steinitz as the government grapples with growing protests over housing costs.

Shani will leave after less than two years at the ministry because of “differences of opinion in fundamental issues” with Steinitz, he said in a letter published today by the Finance Ministry in Tel Aviv.

“To my great sadness, my desire to contribute to the State of Israel from my business and administrative experience can’t be fully utilized under these conditions,” Shani said in the letter. “Events of the past few days have exacerbated the problems I describe.”

The resignation follows a wave of protests over housing costs and other consumer price increases. Prime Minister Benjamin Netanyahu pledged on July 26 to increase the supply of housing to offset rising property prices and appease protestors.

Israel’s benchmark Mimshal Shiklit government bond fell today, pushing the yield up three basis points, or 0.03 percentage point, to 5.03 percent at 1:31 p.m. in Tel Aviv.

“Growing protests over rising prices increase pressure on the government to act,” Ehud Itzhakov, a bond trader at Bank Hapoalim Ltd. in Tel Aviv, said by telephone. “There is concern in the market the government may need to raise more debt, which is creating uncertainty about the deficit. Investors are likely to sell long-term debt and take profits today.”

House Prices

Home prices rose 13.7 percent in the 12 months through April-May, about triple the inflation rate, the Central Bureau of Statistics said on July 15. Bank of Israel Governor Stanley Fischer warned July 8 that the country is facing a potential “housing bubble” that is fueling inflation.

More than 100,000 Israelis took to the streets last night in Tel Aviv, Jerusalem, Haifa and other cities across the country. Netanyahu said today he will appoint a team of Cabinet ministers to talk to protest leaders and address their concerns.

Shani will continue in his post until a replacement is found, the ministry said. Steinitz said he responded to the resignation with both “regret and understanding.”

“The mice are abandoning a sinking ship,” said Zahava Gal-On, a parliament member from the Meretz opposition faction, “The tens of thousands of people who marched yesterday don’t want to see the officials resign, they expect the prime minister and the finance minister to hand in the keys and go home.”

Must Respond

President Shimon Peres said the government must respond to the street demonstrations.

“This generation has a right to speak out and it is our obligation to listen and draw conclusions,” he said in remarks broadcast from Jerusalem on Israel Radio.

Protests continued even after Netanyahu laid out a plan last week to build 50,000 housing units across the country within 18 months. Incentives for building the cheapest rental apartments would include free land provided by the state.

“Some of the claims being made are justified and some are not,” Netanyahu said in remarks to the Cabinet e-mailed by his office. “We are obligated to deal with the genuine claims and distress. This, without doubt, compels us to change our list of priorities.”

Shani, who was the chief executive officer of digital surveillance product maker Nice Systems Ltd. (NICE) before joining the Finance Ministry, was the main architect behind a government technology program to attract international financial-services companies. Barclays Capital announced in March it plans to open a research and development center in Israel with 200 employees, becoming the first company to take up the government’s offer to subsidize salaries under the plan.

To contact the reporters on this story: Alisa Odenheimer in Jerusalem at aodenheimer@bloomberg.net Jonathan Ferziger in Tel Aviv at jferziger@bloomberg.net

To contact the editor responsible for this story: Louis Meixler at lmeixler@bloomberg.net