Political Uncertainty Could Spell Economic Paralysis

While Israeli politicians spend the next three and a half months blaming each other for the election rerun, economists and industrial leaders are worrying about what it will do to the economy.

The key word they’re using is “paralysis.”

Erez Tsur, co-chair of Israel Advanced Technology Industries (IATI), has warned that the current chaotic political environment brings with it a “real fear of economic paralysis.”

Tsur told The Jerusalem Post that “our colleagues from abroad and foreign investors have expressed deep concern regarding what is happening now. When investors see less stability here, it can prevent critical investments and acquisitions, impacting the industry.

“Look around the world and you can see dozens of articles on the subject of repeat elections. In every place, the elections are represented as problematic.”

Several legislative proposals currently supported by IATI in cybersecurity and investments in innovation are now expecting to be put on hold, at least until a new government can be formed after the September election.

“Legislative proposals which are important for both the hi-tech industry and the country will now be stuck, probably for three-quarters of a year,” Tsur said.

Some governmental measures will also feel the freeze: a hoped-for agreement on raising the retirement age for women to 64 or allowing the old pension funds to cut 1.26 percent from their August payouts; the plans for a metro in Tel Aviv; a new multi-year defense budget; and multi-billion shekel budgeting disputes between the National Insurance Institute and the Ministry of Finance will go unresolved, and much more.

The cost of a repeat election has been estimated at roughly two billion shekels in lost productivity from another paid holiday on Election Day.