Former TV Talk Show Host Gets Finance Portfolio in Israel
Yair Lapid, the former talk show host who unexpectedly became Israel’s power broker with the campaign slogan, “Where is the money?” is now in position to find it: He’s going to be the next finance minister.
Lapid, a 49-year-old high school dropout and ex-model, inherits the stewardship of Israel’s economy at a time of slowing growth. Billions of shekels will have to be cut from planned spending and a revenue shortfall has made tax increases likely. In the meantime, millions of middle class Israelis whose cause he champions are struggling to make ends meet.
Complicating the challenge are Lapid’s stated ambitions: While he’s a novice politician, he’s already said he wants to be premier. As a finance minister with no economic background, he will be under pressure to chart a fiscally responsible course that could cost him some of his popularity, said Ben-Zion Zilberfarb, a former finance ministry director-general.
“He created expectations for big changes, for making life easier for the middle class,” Zilberfarb said. “On the other hand, he is coming at a time when he needs to cut the budget and raise taxes. There may be a big gap between the expectations and implementation, and even if he does execute changes, it will take time. This is a difficulty specific to him.”
Israel’s economy, which grew 4.6 percent in 2011, slowed to 3.1 percent last year and, excluding first-time natural gas revenues, is expected to shrink further in 2013. With revenue also coming in under forecast, the outgoing finance minister, Yuval Steinitz, has said the next government must cut 14 billion shekels ($3.8 billion) from 2013 spending to tame the budget deficit.
The government reported a 2012 budget deficit equal to 4.2 percent of gross domestic product, more than double its original target. The Organisation for Economic Cooperation and Development, which calculates it differently, puts the deficit at 4.7 percent. That’s still less than an average deficit of 5.5 percent for developed countries, according to the OECD.
Lapid held a meeting with Steinitz yesterday on the transition at the finance ministry, the Yesh Atid party said in an e-mailed statement.
The market looks at Lapid’s appointment “in a positive way,” said Yaniv Pagot, chief strategist at the Ramat Gan-based Ayalon Group Ltd.
His agenda “matches that of the prime minister and is led by fiscal responsibility. You know the issues will be dealt with and they will not do dangerous experiments with the budget,” Pagot said.
Prime Minister Benjamin Netanyahu called the Jan. 22 election almost a year ahead of schedule because he was having a hard time wresting compromises from his governing coalition to pass a 2013 budget. Lapid, too, recognized the unpopular measures that might have to be taken, and the finance ministry was not his first choice. He took it after Netanyahu refused to give him the foreign minister’s job he coveted, Yael German, a member of Lapid’s Yesh Atid party, said this week.
Lapid’s prospects for success have been improved by a surprise political alliance he made that forced ultra-Orthodox Jewish parties, traditional king-makers with billions of shekels in budgetary demands, out of the government.
Lapid and Yesh Atid, Hebrew for “There is a Future,” unexpectedly captured 19 of parliament’s 120 seats, in defiance of polls forecasting a dozen at best. His privileged life as the son of an influential journalist and Cabinet minister, and later, as a well-paid news anchor, newspaper columnist and celebrity promoter for Bank Hapoalim (POLI) Ltd., didn’t stop him from carving out an image for himself as an Israeli Everyman.
Lapid campaigned on domestic issues he said were important to Israel’s middle class, such as lowering housing costs, cutting entitlements for ultra-Orthodox Jews and eliminating the military draft exemptions they enjoy.
Yesh Atid also opposes letting Potash Corp. of Saskatchewan take over Israel Chemicals Ltd. (ICL), which mines minerals from the Dead Sea for fertilizers. That would make it more difficult for the Canadian company to persuade the Israeli government to let the sale go through. The state holds a so-called golden share in Israel Chemicals, allowing it to block a takeover.
After the election, Lapid broadsided Netanyahu by joining forces with the pro-settlement Jewish Home party, which unlike Yesh Atid, opposes the creation of a Palestinian state. That alliance forced the Israeli leader to break ranks with the ultra-Orthodox parties that have been his traditional coalition partners.
The Bank of Israel has voiced concern that more than half of the men in the growing ultra-Orthodox community pursue lifelong religious studies and don’t work. They have been able to do so because their wives’ salaries are supplemented by government stipends ultra-Orthodox lawmakers have won for the men and their families. Some 60 percent of the community lives below the poverty line, according to government figures.
Lapid will try to cut benefits for the ultra-Orthodox and trim the public sector, predicted Rafael Gozlan, chief economist at I.B.I-Israel Brokerage & Investments Ltd. The market will welcome the incoming government, dominated by Netanyahu’s Likud- led slate, Yesh Atid and Jewish Home, “because this is a government that can do the right thing for the economy,” Gozlan said.
The new government will have no trouble passing a spending plan, because coalition partners won’t want to see the government fall over a budget impasse, Gozlan said. “The minute they have a coalition agreement, there is an agreement on a budget.”
At the same time, Gozlan said, economic policy might be compromised by political rivalry between Netanyahu and Lapid. “At the end of the day, if Lapid wants to advance reforms he needs the backing of the prime minister,” he said. If each is suspicious of the other and trips the other up, “then nothing will get done,” he said.
Lapid has said he entered politics in part to carry on the legacy of his father, Tommy Lapid, who died in 2008. Before the elder Lapid’s now-defunct Shinui party imploded amid internal conflicts, Shinui prodded the government of Prime Minister Ariel Sharon to reduce child allowances, which hurt large ultra- Orthodox families, and remove Jewish settlements from the Gaza Strip.
The Haaretz newspaper has called the younger Lapid, who has also dabbled in acting and amateur boxing, a “former teenage heart-throb with daddy issues” and “the ultimate personification of a political domain obsessed with stardom.”
Zilberfarb, the former finance ministry director-general, pointed out that Lapid is not the first Israeli finance minister to have no economic background. What he will critically need is an experienced staff, he said. “He is taking office at a time when the situation isn’t simple at all,” Zilberfarb said.
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