Lapid: Israel faces economic crisis if peace talks fail

Finance minister says European boycotts will ‘hit every Israeli,’ hike living costs and cut government budgets

Marissa Newman is The Times of Israel political correspondent.

Finance Minister Yair Lapid at the INSS Conference in Tel Aviv on January 29, 2014. (photo credit: Gideon Markowicz/Flash90)
Finance Minister Yair Lapid at the INSS Conference in Tel Aviv on January 29, 2014. (photo credit: Gideon Markowicz/Flash90)

A boycott of Israeli products by European countries, in the event that peace talks fail, would constitute a dramatic blow to the Israeli economy, Finance Minister Yair Lapid warned on Wednesday, in an address at the Institute for National Security Studies conference.

Based on an evaluation prepared by the Finance Ministry’s chief economist, Lapid said that even a low-scale boycott would “hit every Israeli citizen directly in his pocket.” The cost of living would rise, and education, security, health, and welfare budgets would be slashed, he said.

Furthermore, exports would face a loss of NIS 20 billion ($5.7 billion), GDP would likely be lowered by NIS 11 billion a year, and 9,800 workers would be laid off immediately.

“We must recognize that if the talks fail — and the world will believe they failed because of us — there will be a price, and it’s best we know what that price is,” Lapid said.

Lapid also dismissed claims by Economy and Trade Minister Naftali Bennett Tuesday that a Palestinian state would be an economic burden on Israel. A peace agreement would result in an added NIS 20 billion annually to the state budget, and potential growth of NIS 16 billion in exports, he maintained.

“Today Israel is more exposed economically than it’s exposed from a security perspective,” he added. “The security debate makes us forget occasionally the fact that our military is not a goal, it is a tool. It’s a tool that is meant to allow us to reach an agreement that will strengthen Israel’s economy and guarantee its future as a Jewish state.”

The finance minister’s remarks echoed those of US Secretary of State John Kerry last week at the World Economic Forum in Davos, Switzerland. Kerry pointed to the economic benefits Israel would reap from reaching a peace deal with the Palestinians, stating that Israel would have immediate diplomatic recognition and economic ties with the Arab and Muslim world and would potentially see a six percent increase in GDP per year.

Lapid’s address came hours after Prime Minister Benjamin Netanyahu convened a meeting with senior ministers to discuss European boycotts of Israeli companies.

This was the first time Netanyahu’s government sat down to seriously debate strategies to counter European boycotts. A senior government source told Haaretz that the meeting was spurred by the announcement earlier this month from the Dutch firm PGGM, one of the 20 largest pension asset managers globally, that it had divested from five Israeli banks because they are involved in financing the construction of Jewish settlements in the occupied territories.

Numerous pension funds in Scandinavia and the Netherlands have already divested in Israeli defense contractor Elbit Systems over concerns about its activities in the occupied territories.

Up until last month, the European Union had been considering measures to clearly label products made in the settlements, a move that could harm sales. But discussions on labeling have been put on hold for now, because Europe is working closely with Kerry to support ongoing Israeli-Palestinian negotiations.

Lazar Berman contributed to this report

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