CODEL FRIST'S MEETING WITH FINANCE MINISTER

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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