In the last six months, most governments in European countries have been busy with one central issue: how to help their residents cope with the rise in the cost of living. From the moment when the token fell that this was not a “passing” inflation (as the central banks estimated), and that the war in Ukraine is exacerbating the increases in consumer price indices on the continent – they went into action. The European public, generally more sophisticated, began to demand this, whether through the media, in votes in the political system, or even in demonstrations.
● Inflation in Germany soared in July despite government subsidy measures
● In Austria, a grant is distributed to every citizen: the European methods for relief from inflation
● In Europe, an inflation tax is imposed on banks and energy companies to fight the cost of living
● With the help of 20 billion euros: this is how France plans to fight inflation
● Spain’s “easy” way to fight inflation: the banks are on target
● The fight against the cost of living in Austria: grants of up to 1,000 euros per citizen
Almost every central European government has already introduced a multi-billion program to directly help the public deal with price increases. You could read about the multitude of new measures in Globes: Germany made public transportation almost free for three months. France (and many other countries) subsidized the prices of gasoline and diesel at stations and set a ceiling price for electricity. Austria handed out cash grants to residents to deal with rising heating and food costs. Most countries increased welfare payments, distributed food and heating coupons, some even announced that they would increase pensions.
In Europe they do not hesitate to run into deficits
The bottom line is that due to the seriousness of the situation, and the understanding of the consequences of soaring prices on the public, and especially on the weakest strata, European governments do not hesitate to once again enter the deficits that they have tried to reduce since the corona virus. In many cases, it is not a net deficit, but an internal budget diversion, and still increasing government spending for measures designed to make things easier for the public is a fait accompli: France will spend 25 billion euros in the upcoming budget to help residents deal with inflation, Italy will allocate 17 billion euros. The amount that Germany will allocate is expected to exceed 20 billion euros. In an appearance before the French Parliament, French Finance Minister Bruno Le Maire summed up the European approach with a rhetorical question: “Is there a country in the Eurozone that leaves its residents to deal with inflation alone?”
In the Eurozone the answer is no, but in Israel the answer is a resounding yes. The Israeli government is effectively leaving its residents to deal with the skyrocketing prices alone. Every man for himself. With the exception of the temporary reduction of the tax on fuel and coal, and curbing the increase in the prices of controlled bread, the Israeli government took almost no active steps.
It looked at the impending inflation with equanimity, placed the responsibility for dealing with it on the Bank of Israel and monetary measures, but more or less gave up the mandate to help the residents in times of price increases.
The reason for this is that, for better or for worse, Israel currently has a different economic approach than the one that has taken hold in Europe since the corona virus. The Israeli economic approach is still loyal to the principles of deficit reduction, restraint of government spending, non-intervention in the market and growth as the everything. In Europe the situation has changed. A deficit in favor of investment in infrastructure and assistance to residents is the order of the hour. Or as French Finance Minister Le Mer said: “The idea of thrifty countries has been dead for a long time.”
Why not tax huge companies and banks?
The governments are not only spending out of pocket to deal with inflation, but have even “changed the rules” legally. In Great Britain, Greece, Spain and Italy, new taxes were imposed – out of nowhere – on the “excess profits” of energy companies, which benefit from the global price increases without lifting a finger. In Spain, the government has decided to impose a new tax on the excess profits of the country’s banks, which will amount to at least 3 billion euros in the next two years, on the grounds that they are benefiting from the interest rate increases and recording “excess profits”.
Does anyone in the State of Israel even consider taxing the banks in Israel, which earned close to NIS 18 billion last year? Does anyone think that the Israeli government will dissolve giant companies that profit from price increases, and use these receipts to make things easier for the public?
It is possible that the Israeli approach is better than the European one. Israel’s growth forecasts far outpace the apparent recession in Europe. And Israel’s ranking in the international agencies is higher. But these are not the only parameters.
Investing in the future, a higher standard of living, housing at a fair price, significant purchasing power and a lower poverty rate – they all affect life in Israel to the same extent, and are neglected, at least for now.