How did Israel avoid the fate of Greece? Once mired in debt itself, as Greece is, Israel managed to pull itself up by its bootstraps – and has never looked back, said outgoing at the National Economic Council (NEC) Chairman Prof. Eugene Kandel, at the weekly Cabinet meeting on Sunday. During the meeting, Kandel briefed ministers on the economic crisis in Greece and on its implications and lessons for Israel.
Kandel presented figures that showed just how Israel has progressed and successfully maintained a healthy economy, as opposed to Greece, which is a step away from defaulting on billions of dollars in payments to the European Central Bank and the World Bank. In 2004, Greece was doing better than Israel, with a $25,837 per capita GDP (gross domestic product divided by population), while the local figure was $21,796.
Over the past decade, though, Greece's per capita GDP has not grown – while Israel's has climbed by 50%, to $32,691 in current dollars. Employment figures show a similar story; unemployment in Greece rose from 8.4% in 2002 to 26.5% in 2014, while unemployment in Israel dropped from 12.8% in 2002 to 5.9% in 2014.
Perhaps most importantly, Israel has been much more successful than Greece in keeping its debt level down. In 2004, both countries had a similar debt-to-GDP ratio (how much of a country's GDP is needed to service debt) of about 94%. Since then, however, Greece's has shot up to 177.2%, while Israel's fell 68.8% in the same period.
What was Israel's secret? According to Kandel, the main reason for these changes is the difference in economic policies undertaken by the respective governments in the past 15 years. From 2002-2007, the Greek government chose to increase government expenditures and "benefits" to the public, such as pensions from the age of 57, etc., which could not be financed over the long-term. The Government of Israel chose a responsible policy of fiscal discipline and cutting government expenditures.
Kandel's comments were echoed by Prime Minister Binyamin Netanyahu. "GDP per capita in 2003 was higher in Greece than it was in Israel,” he said at the meeting. “We enacted a series of reforms to control expenditures and reforms to open markets to competition – and as a result of this, our GNP per capita has risen by 50% while Greece's, to my regret, has remained the same. We hope that Greece will find ways to rescue itself from this chronic crisis."