US embassy cable - 05TELAVIV2939

C O N F I D E N T I A L SECTION 01 OF 02 TEL AVIV 002939 
 
SIPDIS 
 
E.O. 12958: DECL: 05/09/2015 
TAGS: ECON, IS, XF, ECONOMY AND FINANCE 
SUBJECT: CODEL FRIST'S MEETING WITH FINANCE MINISTER 
BENJAMIN NETANYAHU 
 
Classified By: Ambassador Daniel C. Kurtzer for reasons 1.4 (b) and(d). 
 
 
1. (C) SUMMARY: On May 2, Israeli Finance Minister Benjamin 
Netanyahu outlined to CODEL Frist the economic evolution in 
Israel since he became finance minister in 2003.  Netanyahu 
said he had increased taxes, reduced government expenditures, 
while simultaneously combating welfare fraud, challenging the 
unions and cutting government wages.  As for the future, 
Netanyahu said the ministry is moving on land and tax reform. 
 More broadly, he said that the "socialist thinking" of many 
Israelis must be changed.  Stressing the importance of 
technology and its positive contributions towards the health 
sector and security establishment, Netanyahu added that the 
GOI hoped to receive some (unspecified) level of assistance 
to facilitate economic development in the Galilee and the 
Negev.  END SUMMARY. 
 
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Unpopular Decisions to Revive a Weak Economy 
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2. (C) On May 2, Senator Bill Frist, accompanied by National 
Security Advisor Mark Esper, Press Advisor Nick Smith, and 
Army Senate Liaison Officer Colonel Michael Barbero met with 
Finance Minister Benjamin Netanyahu and his Chief of Staff, 
Yechiel Leiter.  Netanyahu said that Israel's economic 
condition has improved under his leadership.  The Israeli 
economy was "six weeks from collapse" when he took the helm 
as Minister of Finance, Netanyahu said, with the welfare 
system having grown to such an extent under previous 
governments that the state almost buckled under the resulting 
heavy economic strain.  Further, strong union's had forced 
unreasonable concessions from an economically weak nation. 
Under his management, Netanyahu had initially raised some 
taxes, imposed wage cuts and fired unproductive government 
employees.  The GOI encouraged people to go back to work, 
urging them to seek any available employment, even if it was 
less than perfect.  Netanyahu also took credit for raising 
the retirement age and working with unions to find better 
ways than strikes for labor and management issues to be 
addressed. 
 
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Economic State of the State 
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3. (C) Netanyahu told Senator Frist that within ten years he 
aims for Israel to be in the top ten countries in the world 
in per capita income.  Israel is growing stronger in the 
already "solid" tech sector, he said, adding that technology 
patents are many and varied, allowing Israel to export abroad 
and bring profits back to Israel.  Unemployment conditions 
are improving and the GOI is working with unions on issues 
that are important to both labor and management.  Defeating 
welfare fraud is a top priority of the GOI's economic agenda, 
Netanyahu said, pointing to a need for enforcement laws 
against the misuse of government funds.  Those who are 
entitled to financial assistance will continue to receive it, 
Netanyahu said, but others who are abusing the system will be 
cut from the program.  Cutting waste and outsourcing social 
welfare programs such as care for the elderly to the private 
sector in order to lower taxes are showing excellent results. 
 For example the GOI has already privatized nine homes for 
the disabled, with excellent results both financially and in 
the quality of care received.  Netanyahu said his primary 
goal is to privatize 40% to 50% of the government in the next 
20 years. 
 
4. (C) Netanyahu said that the GOI will provide tax free 
status for businesses that come to Israel, in the expectation 
that the jobs and overall economic growth these firms provide 
will more than compensate for lost tax revenue.  The World 
Bank wants to lower its debt and increase its gross domestic 
product (GDP), according to Netanyahu, who noted that 
Israel's current debt to GDP ratio is 102% (Note: The amount 
is more like 105%.  End Note) and the annual deficit is 3.4%. 
 Netanyahu told Frist that the GOI intends to continue to 
reduce its expenditures.  Netanyahu continued, calling the 
Israel Lands Authority (ILA), responsible for over 90% of the 
land within the Green Line, an "old dinosaur" that needs to 
be "slain."  He said Israel needs land reform, in addition to 
a strong free market for growth. 
 
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Needy, Not Greedy 
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5. (C) The security fence has reduced terror activity by 95% 
within the Green Line, Netanyahu claimed.  He also noted that 
Israel might require U.S. assistance to construct efficient 
crossing points.  The technology sector has bolstered the 
security and defense establishments with surveillance and 
early warning systems that allowed the security forces to 
quickly and effectively respond to terrorist activities. 
These advanced technological systems are operated by the best 
and the brightest minds in Israel, who then continue to 
contribute to innovative applications when they return to the 
private sector, Netanyahu said. 
 
6. (U) CODEL Frist did not clear this cable. 
 
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