Country Report Israel March 2011

The political scene: Mr Netanyahu faces discontent over price rises

New strains developed in February for the Likud-led coalition of the prime minister, Binyamin Netanyahu. Having wriggled out of US demands for a settlement freeze and Palestinian peace talks-thereby neutralising what was widely viewed as the biggest threat to his coalition-he is now facing intensified squabbling over religious issues between his junior coalition partners, Yisrael Beiteinu and Shas, while new and unexpected tensions have emerged over the economy.

For many households, improvements in the overall macroeconomic situation have been overshadowed by sharply higher prices for food, water, energy and housing. Following these increases, a popular protest movement sprang up-to be joined by an unusual coalition of non-governmental organisations, comprising the Histadrut labour federation, the Manufacturers Association and the Union of Local Authorities, with the Histadrut threatening the government with a general strike. Coalition backbenchers also jumped on the bandwagon of popular discontent, criticising the finance minister, Yuval Steinitz, at a meeting of a faction of Mr Netanyahu's Likud party in early February and warning that Treasury policies would cost the party votes at the next election. A mass circulation newspaper, Yediot Ahronot, summed up the national mood with its February 8th headline, declaring: "The public is angry and you're ignoring it."

Mr Netanyahu responded with a series of measures, unveiled at a televised press conference on February 9th, reversing the increase in excise tax on petrol, increasing public transport subsidies and raising the minimum wage. The Histadrut, together with its partners, said that the measures did not go far enough. Nonetheless, protests that were meant to bolster the calls for a general strike flopped and the planned stoppage was called off three days later-although talks with the government over further concessions continued.

© 2011 The Economist lntelligence Unit Ltd. All rights reserved
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