Finance Ministry, employers said to agree on NIS 3b. aid package for businesses

The Finance Ministry reportedly reached an agreement with employer and labor representatives on Sunday to provide relief for businesses as the coronavirus pandemic and government directives to limit its spread pummel the economy.

At least NIS 3 billion ($817 million) will be transferred to businesses, though the criteria for the transfers have not yet been announced.

Under the outline, most payments to the government will be postponed, including value-added taxes, income and property taxes, and electricity and water bills. The measure, which is pending approval by the prime minister, will take effect until the end of April or mid-May, according to Hebrew media reports.

Self-employed workers will receive compensation of between NIS 4,000 and NIS 7,000 ($1,000-$1,900) each, for a national total of some NIS 250 million ($68 million).

The government will also step up its loans to small businesses and ease trade regulations.

Employers pledged to hold off on layoffs until after the Passover holiday in mid-April.

Government workers in non-essential positions will be placed on leave under terms that have not yet been decided.

The terms of the agreement will be presented to Prime Minister Benjamin Netanyahu for his approval on Monday.

Representing employers in the talks were the head of the Histadrut umbrella labor organization, Arnon Ben David; the president of the Manufacturers’ Association, Ran Tomer; Roy Cohen, head of Lahav, the Chamber of Independent Organizations and Businesses; and business sector representative Dubi Amitai. The Finance Ministry was represented by its director general, Shai Babad.

Earlier Sunday, the Finance Ministry and the Tax Authority decided to postpone required VAT payments by 10 days, from March 16 to March 26.

The Bank of Israel and retail banks said on Sunday they would take a series of policy measures to mitigate damage to the economy, including by buying government bonds, offering repo transactions, delaying mortgage payments, offering loans to small and mid-sized businesses, expanding digital services for remote transactions, and providing courier services to customers in quarantine.

The measures are intended to increase liquidity and decrease volatility in the markets as spending is curtailed by closed businesses, limited movement, consumer fears and plummeting equities.

It will be the first time the bank takes action in the bond market since 2009’s global recession.

The banks are expected to announce additional measures in the coming days, including easing policies on loans, credit, remote transactions, and ATM cash supplies.

On Saturday night, Netanyahu and government officials announced the shutdown of all leisure businesses and activities throughout the country, with the premier pressing upon the public the need to “adopt a new way of life” for the coming weeks and possibly months as the country deals with the new coronavirus — and particularly underlining a guiding principle of individuals maintaining a distance of at least two meters from others at all times.

Sunday morning saw public life diminished, with the closure of all cafes, restaurants, hotels, malls, movie theaters, gyms, event halls and the like. It was implied, though not specifically stated, that all nonessential shops would close. But Netanyahu stressed that supermarkets, pharmacies, banks and other essential service providers would continue to function.

The Finance Ministry reportedly predicted that the partial shutdown would cost the economy some NIS 11 billion ($3 billion) in six weeks.

The outbreak could shrink Israel’s economic growth for the year by one to two points, from a pre-crisis prediction of three percent growth, the Finance Ministry estimated.

The ministry’s chief economist, Shira Greenberg, estimated that the shutdown would cost NIS 4.5 billion ($1.2 billion) if it were to last only three weeks. The lower number is based on the assumption that employers will fire fewer workers at the beginning of the crisis.

Following the shutdown announcement, Israeli retailers immediately placed thousands of workers on unpaid leave. Restaurants will be allowed to continue offering take out and delivery. The construction sector is expected to remain largely unaffected by the directives.

Last week, the government announced an emergency economic package of more than NIS 10 billion ($2.8 billion) to stabilize the economy and offset some damage caused by the virus outbreak.

Some NIS 8 billion ($2.2 billion) will be dispersed to businesses, NIS 1 billion ($281 million) to the health system, NIS 1 billion to stem the spread of the virus, and an unspecified amount would go to the aviation industry, Netanyahu said. The discrepancy between the earlier, NIS 8 billion pledge to businesses and Sunday’s smaller allotment was not immediately clear.

Israel has confirmed 213 infections as of Sunday evening, and no deaths. Tens of thousands have been confined to quarantine.