The finance mnister has detailed the potential huge cost to Israel if peace talks fail.
“If the negotiations with the Palestinians break down and a European boycott begins, even partially, Israel’s economy will go backwards, every person will be directly affected in their pockets, the cost of living will rise, the health, education, and welfare budgets, as well as the defense budget, will shrink, and many foreign markets will be closed to us,” said Minister of Finance Yair Lapid in a speech to the Institute for National Security Studies on Wednesday evening. He said that a European boycott “does not mean that Camembert cheese will not arrive on time.”
For the first time, Lapid disclosed figures from a special report by Ministry of Finance chief economist Dr. Michael Sarel. Although the report was revealed at the “Globes” 2013 Israel Business Conference in December, the figures were kept confidential, and Lapid had strongly refused to discuss them.
The report states that there is a likely scenario of a 20% drop in exports to the EU and halt in foreign direct investment from the EU. Annual exports will fall by NIS 20 billion, GDP by NIS 11 billion (1.1%), and 9,800 jobs will be lost immediately. Furthermore, cancellation of the EU association agreement, which Lapid says is on the European’s agenda, alone, would cost NIS 3.5 billion in annual exports, NIS 1.5 billion in GDP, and 1,400 jobs. A third of Israel’s exports go to the Europe.
Lapid said that the boycott has already begun. “There is nothing easier for the average European than to announce that he is boycotting goods from the settlements, or even from Israel, because in reality, he encounters very few such goods, and there are reasonable and cheaper alternatives for almost all of them. It is not merely a moral declaration, which makes him feel good about himself, but also an easy campaign that can be managed from the couch at home,” he said, adding, “This is a real process, but we still have the chance of stopping it.”
“The boycott will send prices higher and the cost of living soaring. The already high cost of living threatens Israeli society and the middle class. The boycott will raise prices for food, cars, public transport, communications, electricity, and of course, it will cut the health, education, and welfare budgets, as well as the defense budget.”
Lapid emphasized, “We must not accept the boycott with folded arms, but launch our own public relations campaign. But we should not fool ourselves, the world is listening to us less and less. We must recognize that if the negotiations fail, the world will believe that we are responsible, and there will be a price to pay, and we should what that price is.”
Lapid criticized Minister of the Economy Naftali Bennett for his remark that, “A Palestinian state will destroy the Israeli economy”, saying in response that it does not match any of the Ministry of Finance’s findings.
Lapid revealed that the Ministry of Finance data indicate that peace will save the budget NIS 20 billion a year and could potentially boost exports of goods and services by NIS 16 billion a year. He added that these numbers do not include indirect effects on economic activity, such as productivity and higher tax collection.
Published by Globes [online], Israel business news – www.globes-online.com – on January 30, 2014
Lapid: European boycott would cost Israel dearly