Bank of Israel governor urges gov’t to immediately open small businesses

Yaron said that the government should allow small businesses to open immediately and to pass the budget for 2021. He also proposed a different outline for the one the currently exists for unpaid vacations and said that it would allow for a gradual and flexible return of the Israeli economy to normal activity. 

“Small businesses should be reopened as fast as possible,”Yaron emphasized. “As long as the morbidity rates are not high, and enforcement and deterrence are possible, the country has to prepare for the first lockdown model and to allow these businesses to operate.”

One of the most burning issues in the country, Yaron noted, is the fact that a budget for 2021 has not been approved yet. “Delaying the budget adds the unnecessary aspect of uncertainty to the crisis,” he said. “We can’t rely on last year’s budget for 2021, it’s too restraining. It’s essential that a budget that can adapt the tools at our disposal to the current challenges be approved as soon as possible.”

“Once we have a budget, we have a platform that generates certainty and mobilizes the governmental offices and everyone involved, and mostly allows for a long-term planning process. As things stand today, we’re operating like a car that stops every few minutes,” Yaron explained. “Foreign markets are looking at us and seeing our conduct, and it’s important that they see that we’re managing our budget in an organized manner. 

Nearing the end of the interview, the governor addressed the model of the Israeli unpaid vacation system, which has come under fire by people claiming that it doesn’t encourage employees to return to work, nor does it encourage employers who are interested in hiring employees back. 

“When the lockdown is over, we must create a mechanism that will allow a flexible return to work from unpaid vacations – for example, allowing someone to resume a half-time position while receiving a 50% unemployment benefit,” Yaron said. “That would lower the expenses for employers and give the employee an incentive,” he added.  

Yaron explained that “the unpaid vacation model was right for Israel when the country entered a lockdown, because it allowed employers to immediately put their employees on unpaid vacation. We had a structured mechanism that allowed it, but on the other hand, we don’t have the mechanisms that Germany has regarding supervision and inspection.” According to Yaron, “the flexible model has already been proposed several times to decision-makers. It’s currently being examined and when we come out of the lockdown, we’ll be able to implement it.”

Yaron also addressed the topic of financial security nets for businesses, and specifically to those relating to keeping employees. “It’s an important mechanism and it should be improved. The incentive is currently given for a period of one and a half months and I’m hoping that it will be extended for 3-4 months, so businesses have incentives for keeping their employees.” He added that “these suggestions, if accepted and implemented, would allow, together with the existing model, for the labor market to slowly return to normal.” 

When asked about the government’s conduct during the pandemic, Yaron refused to give a direct answer, and only said that “at the end of the day, there were many different opinions along the way, but we always presented the financial considerations. The process could have been better planned, it wasn’t a surgical process. But the two issues of health and economy always collide.”  Translated by Tobias Siegal.