Social justice cannot be attained is there is no growth. Growth occurs only
if you manage the country's funds responsibly and you do not spend money
without being able to cover the expense and if you don't tax the most
productive bodies in a manner that makes it more worthwhile not to work –
not worthwhile to work, not worthwhile to invest, not worthwhile to earn,
and then the government doesn't get taxes.

Press Conference
Prime Minister Benjamin Netanyahu
OECD Secretary General Angel Gurria
Minister Yuval Steinitz

June 5, 2012

Jerusalem

rime Minister Benjamin Netanyahu: Angel, it’s very good to see you along
with our colleague Finance Minister Yuval Steinitz. I welcome you again to
Jerusalem. You have been a superb director of the OECD and of course one of
your greatest achievements was getting Israel into the OECD. We never
forget that and we appreciate your friendship, your cooperation, your
honesty, your professionalism.

We were just speaking, the three of us, and I’d like to touch on the most
important observations that we have. The first is, we’re still in a global
crisis. Not only is it not over, it’s far from over. The second is that
Israel up to now has done better than most of the OECD countries, indeed
than most countries on the globe. And the third is that we’ve done better
because we maintained the right policies. We had greater growth than the
OECD. We have a much lower unemployment. We added 250,000 jobs in three
years.

Why did that happen? It didn’t happen because the air is better here. It
happened because we controlled our spending; we didn’t allow deficits to
grow out of the ceiling; and we didn’t squeeze taxes sky-high because we
realized we’d get more tax revenues from lower tax rates rather than the
opposite. Many of the OECD countries, and you can tell me otherwise,
Angel, would now have hoped that they had done this, these policies that
were under attack in Israel, but that we clung to. If they had clung to
them, I think they’d be in a different situation.

My point is that we’re still in the situation and the policies that have
worked for us so far, are the policies that will work for us in the future:
control spending; be careful and responsible; encourage growth; do reforms.
We did the Trachtenberg reforms on education – free education. We’re doing
the de-concentration reforms to allow more competition. We just opened the
telecommunication markets to competition. Look at how prices are falling;
and productivity will rise. People enjoy – they have more money in their
pockets. Break up cartels, break up monopolies, control government
spending, and don’t tax yourself to a recession.

These are the simple principles that we adhere to and they’re the ones that
are responsible for the health of the economy, for producing jobs, for
getting people in the job market – that is what is reducing poverty in
Israel for the first time – the greatest rates in the last decade and
poverty has fallen consistently for two consecutive years because people are
joining the job market, and there are jobs to be had. And because we're
helping with the increased revenues of the government to the old people, who
can't join the job market and who deserve our help. That's why poverty is
going down.

So there's no contradiction whatsoever between the right growth market
policies, which are pro-market, and anti-cartels and social justice. They
go hand in hand. The greatest danger that I see in Israel is the thinking
that says that there is a contradiction – [TRANSLATION] there is no
contradiction between responsible management of a free economy and social
justice. There is no contradiction. Social justice cannot be attained is
there is no growth. Growth occurs only if you manage the country's funds
responsibly and you do not spend money without being able to cover the
expense and if you don't tax the most productive bodies in a manner that
makes it more worthwhile not to work – not worthwhile to work, not
worthwhile to invest, not worthwhile to earn, and then the government
doesn't get taxes.

There is an important balance and Israel maintained that balance. Israel
overcame an enormous crisis with tremendous success, almost better than all
the countries represented by the Secretary General of the OECD. We not only
created a quarter million jobs, we experienced growth and we maintained the
debt framework and even reduced it, where in other countries it increased.
We managed it responsibly, with growth, more jobs and a reduction of
poverty, because people entered the labor market and so we had more money to
give to the elderly because of that growth.

These are important achievements. They do not guarantee anything unless we
maintain our policies, and the most important distinction I heard today in
my conversation with the Minister of Finance and Angel Gurria – the most
important thing he said to us today: we are still in the midst of the
crisis. Keep your responsible policies in place. Don't think that you can
open up all your storerooms. You don't have that ability, keep with the
successful policies that led you to this point. I'm sure you will hear this
from him and from my colleague.

Minister Yuval Steinitz: Angel, you really became a hero in Israel and I
can say with confidence that without you, without your dedication, without
your friendship, Israel would not become a full member of the OECD. It’s
only due to your efforts, to your dedication and to your friendship, unaware
that this is your office, we became friends and this was also very helpful
to the entire process. I think that the Chairman of the OECD, Angel Gurria,
is here to warn us, as the Prime Minister emphasized. It is still a very
dangerous, an extremely dangerous world, that the Israeli economy despite
the relative success so far following the initial blow of the crisis of
2008, 2009 – we were growing almost 5% in 2011; we produced, allow me to
correct you a little bit Mr. Prime Minister, almost 300,000 jobs, since the
establishment of the new government.

Prime Minister Benjamin Netanyahu: …a positive correction.

Minister Yuval Steinitz: So far from April 2009 to April 2012, to produce
almost 300,000 new jobs instead of 150,000, which is the average in a
regular year. So we produced double the amount of new jobs than in regular
times. And most significant of all, the level of investments in the real
economy in Israel, after going down in 2009, jumped by 35% together in
2010-2011, which is the secret of our rapid economic growth. But we got a
very clear warning from Angel Gurria, that this global economic war is still
out there, that the world is still extremely dangerous, especially following
the events and the problems in Europe and therefore the main mission of
defending the little Israeli economy and its citizens, from the fate of
other countries – in America and in Europe, like Spain, like Greece, like
even France or Britain or United States or Italy or Ireland, or Portugal –
this is still the main issue, this is still the main priority. And in order
to achieve this we should keep the same policy including keeping the budget
framework, the fiscal rule and reasonable deficit, because this is a
necessary condition in order to keep the relatively good achievements of the
last three years. Now I’d like to say a few sentences in Hebrew.

[TRANSLATION] I think that this visit is extremely important. I ate with
Angel Gurria last night and today in the meeting with the Prime Minister.
Not that we are unfamiliar with the details, but in the most tangible
manner, from a man who stands at the center of the international economy and
who is in contact with the G7, the G8 and the G20, and in light of the
crisis in Europe – we received a very severe warning that the global crisis
has not only not disappeared, but there is a very real danger that it will
grow stronger and that the threat to our national economy and to the
citizens of Israel still exists.

Therefore, our main mission was and remains – and this is our top priority –
reasonable growth, positive growth and as high as it can be, along with low
unemployment. If we do not maintain budgetary responsibility – he repeated
this over and over again: if you do not maintain budgetary responsibility,
not breaking the budgetary frameworks and a reasonable deficit that appears
under control (it can move this way and that, but it must appear to be in
control) – if you do not maintain these things, you will endanger Israel's
economy and its citizens. If you do maintain it, you will be able to
continue growing and protect Israel's citizens from the difficult economic
blow that citizens of other countries are experiencing. From this
standpoint, this is a very important visit because it sharpens and makes
tangible these things and the external threat that still faces us, that
threatens our economy, and therefore our citizens in the best manner. So
this is an important visit which will help us understand the international
environment in which we find ourselves and to help finance our work
responsibly and accordingly.

Thank you.

OECD Secretary General Angel Gurria: Prime Minister, Minister, Ladies and
Gentlemen, I suppose, out of courtesy, I should start by saying to my hosts
that they have done very well, exceptionally well, in a very, very difficult
world economy. The fact that you grew at all in a year like 2009 – you were
in decline and then you recovered very fast to close to 5% in 2010 and 2011.
You're going to be above 3% this year, closer to 4% next year. This is
quite exceptional, and it is double or triple, depending on which part of
the world you see, in terms of speed.

We are also looking at relatively tame inflation numbers. The unemployment
rate is coming down. You just saw what happened with the United States last
week. It went up. In Europe, unfortunately, it is still going up, closer
to 11% in the Euro area on average. And of course, if you took the youth
unemployment, then you would not take 11%, you would take maybe 20%, 25%
average, and in some countries 30%, 40%, even 50%. You're talking about
OECD countries, the youth.

Deficit-wise and debt-wise: what is happening with the debt in the OECD
countries? We just went through 100% of debt to GDP. We started at about
70% in the '70s before the crisis. We have added like 30% more and in the
case of Israel, it is coming down from about 80% and now, in the last few
years, to slightly above 70%, and with a plan to continue to come down. So
you are really moving in the right direction under very, very difficult
circumstances. I would only say: stay the course. That is the way to go.

These are signals. This is a language. This is not just virtuous fiscal
prudence, which you must have, but it also, in the present circumstances, is
much more than that. It is an asset. It's a precious asset that you have
to keep and that you have to preserve and you also have to make others know
that you are practicing it – the translation and the logic for the Israeli
people first, but then to the rest of the world why you are doing it, why it
is necessary. It's a differentiation of the product in a time when products
need to be differentiated very badly because the assumption normally is that
things are going to get worse, and in the case of Israel, the numbers are
looking better. You have a path in terms of deficits. Then of course,
there is a combination of keeping the path – which means revenue, which
means expenditure, which means dismantling some privileges of the past –
whatever. This is a test that is happening everywhere, but I have to say
that staying the course has rewards, and that today, it is something which
the markets not only value, but take the opposite, take the alternative.

When the markets see weakness, when the markets see a lack of resolve, they
immediately pounce, and they go for the jugular. You are familiar here with
heat-seeking missiles – I think what we have in the market today are
weakness-seeking missiles that are ready to hit you the moment they see that
there is some vulnerability. So I would say, let's give those signals about
resolve; let's give those signals that we are staying the course, because
out there, it was bad enough and it may get even more complicated in the
months to come.

It's like preparing for a storm, you know? You see storm warnings. Well,
you start closing the windows of the ship and you trim the sails and
everybody gets on their raincoats, and you hold on and you prepare. And by
the time it comes, you will do better.

Last time I came here, I mentioned the Avis Rule. The Avis Rule means that
we are number two, so we try harder. Well, that continues to be very good
advice, and I come from a number two country also, from Mexico, and we are,
like Israel, doing quite well in Mexico with the growth and with the
employment creation, etc., but the vulnerability of open economies is very
great because who buys the stuff? Well, the other countries, they’re not
growing, the other countries that are not investing, the other countries
that don’t have a level of confidence in where people are saving or
deferring the investment decisions, etc. I would say that everything points
in that same direction, and it's also because you don't just have 100%
deficit GDP in the OECD as an average. It's because you have some countries
that are going into the 120%. Already, Greece is 160%, Japan is 210% and
probably still growing. And this is a problem. This has not stopped.
These numbers are going to get larger, so continue making them lower.

You spoke, Mr. Prime Minister and Mr. Minister, about the budget framework
and the fiscal rule. It's good to have one and it's even better to stick to
it, because again there's a direction. There's an expectation. There's a
certain predictability which in these days has a premium attached to it, has
a bonus attached to it. And then you say, well, if we will not have the
stimulus already Central Banks have, although here your Central Bank has
been very careful to avoid inflationary expectations, most of the interest
rates around the world are very low. We are all taking care of the budget's
fiscal consolidation etc., so well, where to go?

Well, there's still a lot of work to do: to go structural, to look at
education, to look at innovation, to look at competition, to look at
deregulation, to look at decentralization. We're just going to deliver –
about regional development – a report about the Negev, about some
development, about clean tech clusters in the Negev. You also have a
liberalization of labor markets, a liberalization of product markets. The
health system, the tax structure – all of these are things that you can look
at, and normally they say, "But we are in an emergency". Short-term, we
have to take short-term decisions. These are long-term issues. You would
be surprised to see how much these "long-term issues" produce short-term
results, or in a lot shorter period than you would think if the
communication is right, if the translation is right, if the education is
right, if people understand where you're going, you will start to get a
confidence bonus earlier and the short-term costs will be reduced.
Sometimes I say, quite paradoxically, because we run out of room on the
monetary policy side and on the fiscal side, the best short-term policies
are structural policies, which is a bit of a paradox, but that may be the
case.

The last comment I would like to make, Mr. Prime Minister, is: you have been
a champion of steadiness and have chosen this path. Sometimes it is not so
popular. Sometimes it is not so politically productive to go down this
path. I can only tell you, in the end, it is the one way in which Israel is
going to make it possible to be in a position to have an even stronger
social capacity, a capacity to respond to the social demands which are
legitimate. They are there; we know them very well at the OECD. Remember,
two years ago we delivered a study about social cohesion in Israel, about
labor policies in Israel, so we are familiar with these issues. We follow
them very carefully. But the question really is: to be in a position to
better respond to these demands, you have to have the fundamentals very,
very strong. And that, I think, is the way to go.

So again, congratulations. As we say, not a lot of complacency – a pat on
the back and move on. Okay? Thank you.