Israel, in new economic boost, joins Paris Club of rich countries that help poor ones

PARIS – Israel on Tuesday joined an influential group of rich nations that help poor indebted economies, giving the country an international boost of recognition for its economic accomplishments.

The news that Israel had been accepted into the Paris Club of creditor nations was welcomed by Israeli policy makers, who are facing calls to reduce high levels of poverty and inequality even as the country’s economy hums along.

The Paris Club announced Israel’s induction, bringing its membership to 20 countries. The club is an informal group of governments, including the United States, that collectively negotiate deals with poor countries struggling with huge debts. It was created in 1956 and has worked out loan deals for 90 countries.

It can cancel or restructure debts when countries are at risk of default. Argentina agreed in May with the Paris Club on a plan to resolve $9.7 billion in debts that have gone unpaid since its economic collapse in 2001-2002.

Israel’s finance minister, Yair Lapid, lauded the Paris Club announcement, saying it “shows Israel’s economic might and presents additional proof that Israel’s place is alongside the strongest countries.”

Once a tiny farming nation, Israel has evolved into a high-tech economy with numerous startups and companies in communications, software and military technology. Its economy continues to grow, and unemployment is roughly 6 per cent, well below the double-digit levels seen in many parts of Europe.

After a 16-year effort, Israel was accepted into the Organization for Economic Cooperation and Development, a policy forum for the world’s most developed economies, in 2010. Still, more than 20 per cent of Israelis live in poverty, nearly double the OECD average. This week, a government committee urged Israel to pump nearly $2 billion into social services and welfare programs.

“We are like two Israels in one,” said Dan Ben-David, executive director of the Taub Center for Social Policy Studies, an independent Jerusalem think-tank .

“It is cutting edge by every stretch of the imagination, and fortunately for us, it’s leading the country,” he said. “The problem is that we have another Israel here, and that other Israel isn’t receiving either the tools or the conditions to work in a modern economy. That other Israel is huge and growing.”

Israel’s continued occupation of lands captured in the 1967 Mideast war has also emerged as an economic issue. Lapid, the finance minister, has said spending on isolated West Bank settlements is a waste of money.

Israel is also facing a burgeoning movement calling for divestment and sanctions in response to its policies toward the Palestinians. Last weekend, the Presbyterian Church (U.S.A.) voted to sell its stock in three U.S. companies whose products Israel uses in the West Bank.


Federman reported from Jerusalem.