Price hike: A nightmare for Israel’s finance minister

Worrisome data predicting a wave of price hikes in the economy have been sitting on Finance Minister Moshe Kahlon’s desk for the past few days. Nevertheless, when upsetting data about price increases on electricity, water and an assortment of foodstuffs began to be emerge on Dec. 11 and dominate the mass media and the political agenda, Kahlon found himself in a very uncomfortable, defensive position.

Kahlon immediately understood that he faced a crisis and decided to establish a committee to lower the cost of living, headed by professor Yaron Zelekha, former accountant general of the Finance Ministry. Kahlon’s goal was damage control and to soften the media attack on him Dec. 12. From a tactical point of view, Kahlon’s move was not necessarily the right one. The very creation of a committee amplified media-wise the problem and drew even more negative public attention to himself. It seems that he acted out of pressure.

All of the media outlets widely covered the effects of the price hikes on family budgets and the damage to weaker echelons. And all of this is taking place under the watch of Kahlon — the “most social-justice oriented” finance minister to have ever served here. This is bad news for the Kulanu Party chairman. Unless the current wave stops, Kahlon will be the first to pay a political price.

The current rise in prices constitutes the biggest increase Israel has seen since the social-protest movement in the summer of 2011, and it was hard to foresee. It is the product of an accumulation of several factors such as the weakening of the shekel vis-a-vis the dollar and the euro, the rise in prices of raw materials and the drought. All of these factors caused a chain reaction in the recent months of rising prices of foodstuffs and other basic consumption. It became a snowball over which the government has no real control.