Major Banking Economic Crisis in Israeli

As examples of the latter sign loans, assert Hapoalin had to write off some industrial loans, and Bank Leumi suffered losses on failed real estate loans in the coupled States. Bank Leumi had acquired these real estate loans through the acquisition of a branch bank network in the United States from Bankers place in the late-1970s. Bank Hapoalin has recovered better than fork up roughly Israeli banks since 1983.

Israel's banks are viewed by the Israeli political science as instruments of public policy. At the conclusion of the 1983 rescue operation, the Israeli government owned between 87 partage and 97 percent of the shares in six banking institutions that included the four largest bank in the country.

Economic Events Preceding the Crisis

The Israeli economy was unstable in the 1970s and early-1980s. Government expenditures consumed a large proportion of the country's porcine national product (GNP). By 1978, the government collected taxes that equaled intimately one-half of the total GNP. Even this high level of tax revenue was insufficient to fund the budget. Thus, the government, to finance the deficit, was forced to imbibe from the Bank of Israel, the country's central bank?in effect mental picture money, an inflationary activity.

Israel began experiencing double-digit inflation in 1973, and triple-digit inflation began in 1979. By 1980, the annual inflation rate was 131 percent; by 1982, 131.5 percent; and by 1983, 190.7 pe

Yosha, O. "Privatising Multi-Product Banks." Economic diary 105 (1995, November): 1435-1453.

2.

Budgetary targets have been modified to constrain means funding requests for specific programs.

1981 116.8% 10.4% 4.2% 5.1%

3. Within the context of the macro adaptations, operation funding requests are based upon budgetary targets, as contrary to deriving budgetary targets from agency fundings requests. Thus, the fiscal process at the level of the national government has been transformed from a bottom-up procedure to a top-down procedure.

Effects of the Crisis on the Israeli General Public

The macro adaptations to the environment of fiscal restraint have enhanced the relative importance of the Finance Minister among footlocker members. Societal objectives and governmental initiatives under the stewardship of non Financial members of the cabinet are sublimated to the overriding goal of controlling governmental spending.

1975 39.3% - 2.0% 3.0% 3.1%

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