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Treasury director resigns amid deepening turmoil under Minister Katz

Keren Terner Eyal steps down after just 5 months on the job, as crisis swirls over budget and virus response; move comes after several other senior ministry officials resign

Raoul Wootliff is the The Times of Israel's political correspondent.

Keren Terner Eyal, then-director general of the Transportation Ministry, attends a hearing at the Knesset, on March 20, 2017. (Yonatan Sindel/Flash90)
Keren Terner Eyal, then-director general of the Transportation Ministry, attends a hearing at the Knesset, on March 20, 2017. (Yonatan Sindel/Flash90)

In the most dramatic of a series of high-profile resignations at the Finance Ministry, director-general Keren Terner Eyal announced on Sunday that she would be stepping down after five months on the job.

The resignations have stemmed from ongoing disagreements in the Treasury over how to stem Israel’s coronavirus infection rate while attempting to minimize damage to the economy, with assertions that decisions are being politicized and that Finance Minister Israel Katz is stifling debate.

Quoting comments to her close associates, Ynet reported that Terner Eyal — who took over after her predecessor Shai Babad resigned in May — had complained on Sunday that “what’s going on in the ministry is crazy. Everything here is shooting from the hip. There are no professional consultations. I can no longer continue in this situation.”

Channel 13 quoted her associates saying she was pushed over the edge by her belief that decisions were being imposed from above for political reasons, and felt unable to remain in the post especially with jobless totals nearing a million. Some 960,000 Israelis are currently unemployed, about a quarter of the workforce.

She reportedly also complained that the ministry’s failure to prepare a state budget was “unforgivable.”

Manuel Trajtenberg, an economics professor at Tel Aviv University and Haifa’s Technion, and a former Labor MK, said the Treasury was “falling apart,” with its senior officials quitting or being fired one after the other. The top professional leadership spots were now vacant, he told Army Radio on Monday morning, and the ministry had effectively been “annexed” by the Prime Minister’s Office and Prime Minister Benjamin Netanyahu’s economic adviser Prof, Avi Simhon.

Terner Eyal reached her decision to resign in coordination with Katz, according to a joint statement, which said that she would step down in the coming weeks “in light of her personal request.” Terner Eyal was a personal appointee of the minister’s.

The Ynet news site reported that Katz had asked Terner Eyal to remain in the position until after the so-called coronavirus cabinet meets later in the week, but due to increasingly acrimonious relations between the two, she turned down the request and demanded the announcement go out immediately.

Her resignation follows the departures of the head of the Finance Ministry’s Budgets Department, Shaul Meridor, and Accountant General Roni Hezkiyahu. It comes after officials have for months charged Katz with pushing policies for political reasons with the goal of boosting Prime Minister Benjamin Netanyahu and the Likud party. Katz has also been accused of stifling dissent by ministry officials.

Finance Minister Israel Katz holds a press conference at the Finance Ministry in Jerusalem on July 1, 2020. (Olivier Fitoussi/Flash90)

Shortly after the announcement of Terner Eyal’s resignation, Katz said that he had ordered the Treasury to prepare the 2021 state budget for government approval in December, rejecting the Blue and White party’s demand that it be prepared immediately along with the 2020 budget set to be passed days before the end of the year.

Israel has been without a state budget since 2019 and could end 2020 without one, due to an ongoing feud between Likud and Blue and White over whether the budget should include 2021 as well.

Defense Minister Benny Gantz of Blue and White is calling for the budget to cover all of 2021, while Netanyahu is insisting that it only address 2020, which would provide him another exit ramp to go to elections without having to hand over the premiership to Gantz, as part of their power-sharing deal.

Katz’s announcement means that Finance Ministry officials will not be able to work on the two budgets together.

In her Sunday statement, Terner Eyal thanked Katz “for many years of working together for the well-being of Israeli citizens in the ministries of transportation and finance.”

She said she was “convinced that together with the dedicated professionals in the ministry, [Katz] will lead a broad economic program to deal with the economic crisis due to the outbreak of the coronavirus.”

A former director-general of the Transportation Ministry — which was headed by Katz in the previous government — Terner Eyal was appointed director-general of the Finance Ministry when Katz took over in May. But the relationship between the two quickly soured, as was highlighted by Meridor’s exit.

After resigning in protest of the government’s “irresponsible” economic policies, Meridor warned that the government was making fateful decisions haphazardly and unprofessionally, and had imposed an “atmosphere of terror” among the professional echelon in the ministry to try to stamp out criticism.

Budget director Shaul Meridor attends a press conference with at the Finance Ministry office in Jerusalem, September 23, 2019. (Flash90)

Katz responded to the resignation by accusing Meridor of objecting to his policies for “political reasons.” Netanyahu lashed out at Meridor for opposing his plan to disperse financial aid to all Israelis, a strategy that has met with considerable backlash — from economic experts, opposition leaders, and members of the public who said aid should be going to the country’s struggling populations, and not to those people who have not been greatly damaged by the coronavirus crisis.

Terner Eyal, in a series of tweets, said in July that it was “very difficult for me to remain indifferent to the unprecedented criticism of my ministry’s staff, and in particular the head of the budget department, Shaul Meridor.”

She lamented “the very violent discourse that has been developing against us on social media.”

Terner Eyal said the role of Meridor and the others was simply to implement the policy decisions of the government, and stressed they were not involved in making policy themselves.

Katz, however, publicly rebuked Terner Eyal for her comments, saying she should have received his prior authorization before responding publicly.

Katz in a statement said at the time that it was not Terner Eyal’s job to wage public fights or to defend the ministry’s bureaucrats, but to “carry out the decisions of the political leadership.” He added that it was up to him as minister to “resolutely defend the positive contribution of professional officials.”

With Terner Eyal’s departure, Katz has tapped Tax Authority chief Eran Yaacov to serve as acting director-general and to oversee the ongoing economic response to the pandemic until a permanent appointment is made, Sunday’s statement added.

A woman walks her dog past a closed store on Ben Yehuda Street in downtown Jerusalem on October 7, 2020, during a nationwide coronavirus lockdown. (Nati Shohat/Flash90)

Israel has been under a national lockdown for the past three and a half weeks to contain a raging second wave of the pandemic, which at one point reached some 9,000 daily cases. However, recent days have seen both the number of daily cases and the percentage of positive tests go down amid sweeping restrictions on the public.

In a letter sent last month to Health Ministry Director General Chezy Levy on the eve on the lockdown, Terner Eyal warned that new restrictions on work would have “a dramatic and painful cost for the economy that will reach into the billions of shekels in the near term, as well as dramatic economic and social ramifications over the long term.”

She noted that morbidity figures track roughly two weeks behind measures meant to contain them, “so any decision on new steps that will further hurt the economy just days after the [existing] restrictions were put in place, and before we have a clear view of the health effects (and certainly of the economic effects) from shuttering commerce, restaurants and entertainment, and the education system, is premature.”

She also argued that the health benefits of new restrictions were not commensurate with the economic damage they are expected to cause, which carries a long-term health cost as well.

“The step with the greatest economic cost of all would be the closure of workplaces, which risks irreversible damage in the medium and long term,” Terner Eyal wrote, urging “that we avoid another severe blow to the economy before the public and business owners have had a chance to implement the significant preventative measures already in place.”

The Bank of Israel estimated last week that each week the country remains closed without opening businesses that do not have customers will cost the economy about NIS 2.8 billion ($822 million) and will leave 400,000 people unemployed.

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