Olmert and Treasury in clash over pension plan

By Yaakov Katz, December 4, 2008

With two months left until the general election, Prime Minister Ehud Olmert and Finance Minister Roni Bar-On exchanged barbs this week over their different approaches to a pension safety net.

In a rare step, four of the top Finance Ministry officials wrote to the Prime Minister to accuse his office of acting illegally to sidestep the Treasury’s authority.

The letter was sent after Mr Bar-On, from Kadima, discovered that Mr Olmert, his long-time political ally, had ordered his office to prepare a plan that would provide Israelis close to retirement with a safety net for their pension funds.

Over the weekend, Mr Olmert met union chiefs and agreed to extend the safety net to Israelis over 55 years old, rather than 60 as the Treasury had recommended.

Mr Olmert had refused to approve the Treasury’s limited pension safety net in favour of a broader plan, in an effort to avoid a public sector general strike.

“We are aware of the pressure on you due to the upcoming elections,” the Treasury chiefs wrote in their letter to the Prime Minister. “Nevertheless, we ask that you refrain from taking any action that is out of your jurisdiction.”

Mr Olmert’s office rejected the charge that formulating such a plan was beyond his authority and pointed to the United States, England, France and Italy as countries where presidents and prime ministers — not just finance ministers — were leading efforts to save their economies and protect victims of the recession.

On Monday, Bank of Israel Governor Stanley Fischer sided with Mr Olmert’s plan, which he said was similar to the plan proposed by the Treasury but appeared to be “better” for Israel.

At the same time, Mr Fischer warned of “political economics. We all have to unite and support the plan,” Mr Fischer said in an apparent reference to the disagreements between Mr Olmert and Mr Bar-On. “But everyone needs to keep in mind the effect being generous today will have on the future. The Israeli economy is not as flexible as the American economy.”

However, Mr Fischer added: “I have a feeling that we are on our way out of the financial crisis. We have moved into positive ground. There are ups and downs, but the overall is positive,” while adding the caveat: “This is a gut feeling, not a fact.”

Foreign Minister and Kadima Chairwoman Tzipi Livni, who this week called on Mr Olmert to step down after the attorney general announced plans to indict him on corruption charges, slammed the government’s refusal to approve the Treasury’s plan.

“Politics cannot override what is correct [and] critical and vital economic decisions have been unnecessarily postponed,” Ms Livni said.

Last updated: 12:35pm, December 4 2008