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Will Moshe Kahlon Force Honest Capitalism on Netanyahu?

Netanyahu on Sunday publicly offered the Finance Ministry post to Kahlon, who left the Likud government and now heads his own Kulanu party.

Moshe Kahlon

The Consumer Price Index (CPI) sank 0.7 percent in February, following a 0.9 percent drop in January, but Israel’s media have buried the report, presumably because it would have been a boost to Prime Minister Netanyahu.

But Netanyahu cannot take any credit for the drop in prices, regardless of whether or not the local media are interested in good economic news.

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So, without much notice, the CPI has fallen 1.5 % over the past 12 months and 1.6% for the first two months of this year.

The drop in the price of crude oil was sharper than the rise in the shekel-dollar rate, accounting for a reduction in the price at the pump.

But Internet and telecom services have also dropped 2.7 percent last month, another result of the free competition initiated in the previous Netanyahu term, under then-Communications Minister Moshe Kahlon.

Netanyahu on Sunday publicly offered the Finance Ministry post to Kahlon, who left the Likud government and now heads his own Kulanu party.

The name “Kulanu” must be scary to local tycoons, who’ve learned to associate Kahlon with the dismantling of monopolies. Indeed, immediately after the publication of Netanyahu’s offer to Kahlon, the banking index on the Tel Aviv Stock exchange dropped by 1.5%. The tycoons might be worried that Finance Minister Kahlon would cut the repressively high fees Israeli banks charge their customers.

The Globes business newspaper reported:

“Kahlon is promising substantial reforms in the Israeli banking system, especially the opening of the sector to competition, as he did in the cellular market. The stock exchange is listening to him, and in view of the likelihood that he will be appointed Minister of Finance, investors are sending the banks shares…southward.”

Except that, if anyone thinks Kahlon would destroy the ability of various companies to eke out a profit, they should a look at the Cellcom mobile phone company:

Kahlon said several years ago that there was no reason for the oligarchy of mobile phone companies to earn billions of shekels a year. Cellcom’s stock was selling at more than $32, and its shareholders enjoyed a steady, 10 percent rise in the price of the stock every year, along with a fat dividend of more than 12%.

That was before Kahlon opened the market to free enterprise, which was followed by a 90 percent drop in cell phone rates.

Cellcom’s shares eventually sank to approximately $5, but is the company losing money? It just reported its earnings for 2014, and don’t shed any tears for the shareholders—their
net income increased 2.9% compared with 2013.



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