Bloomberg News

Specter of Euro Collapse Spurs Emergency Plan: Israel Overnight

January 26, 2012

Jan. 26 (Bloomberg) -- Israel’s government is preparing for a possible collapse of the euro region, the destination for about 30 percent of its exports and a source of tourist revenue, Finance Minister Yuval Steinitz said.

“We cannot deny the possibility” that one or more major members of the euro zone will exit the bloc, Steinitz, 53, said in an interview yesterday at Bloomberg’s headquarters in New York. “If the euro zone will disintegrate, that’s a whole new crisis. We have an emergency plan in the worst case scenario.”

The Finance Ministry reduced its growth predictions for 2012 this month, to 3.2 percent from 4 percent, citing Europe’s sovereign debt crisis. Greece, with a total 350 billion euros ($454 billion) of debt, is in talks with bondholders as it seeks to avert a default. More than half the respondents in a Bloomberg Global Poll published yesterday say one or more nations will leave the euro in the next 12 months.

Israeli stocks are rebounding this year from declines in 2011. The benchmark TA-25 Index rose 1.5 percent to 1,130.25 at the 4:30 p.m. close in Tel Aviv, bringing the gain this year to 4.1 percent. The Bloomberg Israel-US 25 Index of the largest Israeli companies traded in the U.S. advanced for a seventh day yesterday. Allot Communications Ltd., which makes equipment for monitoring Internet traffic, led gains as the Defense Ministry ended its probe on whether the company’s gear was sold to Iran.

Partner Communications Co. dropped to the lowest level in almost six years in New York after Citigroup Inc. cut its recommendation on Israel’s second-largest mobile-phone company.

Exports in ‘Jeopardy’

The Bloomberg Israel-U.S. index has added 0.3 percent to 92.80 and is up 11 percent this year.

Steinitz said yesterday the government is prepared to assist exporters and provide state guarantees to industry in the case of a breakdown of the euro region.

“If the euro collapses, it’s not just exports that will be in jeopardy, but tourism may be an issue as well,” he said.

The country may see fewer European visitors and more Israelis may chose to vacation in Europe because it will be cheaper for them, he said.

Steinitz, who was a lecturer in philosophy at Haifa University before entering the Knesset, Israel’s legislature, in 1999 as a member of the Likud Party, declined to provide specifics of the government’s plan.

The Bank of Israel, led by Governor Stanley Fischer, cut its benchmark interest rate on Jan. 23 for the third time since the end of September, saying that Europe was facing a recession that was hindering the domestic economy. Israel’s shekel has weakened 9.9 percent versus the greenback over the past six months.

‘Reasonable Level’

A rate of 3.7 to 3.8 per dollar is a “reasonable level” for the shekel as Europe’s debt crisis persists and the outlook for the global economy worsens, Steinitz said.

The weakening is “very positive” for the Israeli economy as it makes exporters more competitive, Steinitz said. The nation’s central bank is no longer intervening in the market as the currency has reached an acceptable level, he said.

The shekel rose 0.5 percent to 3.7463 a dollar at 4:54 p.m.

The nation’s economy grew 4.8 percent in 2011, triple the average pace for the most advanced economies forecast by the International Monetary Fund on Sept. 20.

Steinitz said local and foreign real investments in the economy in 2011 were 35 percent above levels in 2009 and 2008, which helped create more jobs.

Developed Market

Israel, whose population of 7.8 million is similar in size to Switzerland’s, was upgraded to developed market status by MSCI Inc. in May 2010, the same month the 63-year-old country was accepted to the Organization for Economic Cooperation and Development. Israel has about 60 companies traded on the Nasdaq, the most of any nation outside the U.S. after China.

Rosh Ha’Ayin, Israel-based Partner dropped 5 percent to $7.97 yesterday, after the Tel Aviv shares dropped 6.2 percent to 30.20 shekels, or the equivalent of $8.02. Citigroup Inc. cut its recommendation on the company to “sell” from “buy.” The shares gained 1.3 percent to 30.60 shekels, or $8.17 in Tel Aviv today.

Allot jumped 6.1 percent to $16.55 in New York yesterday. The Defense Ministry cleared Allot of wrongdoing, saying its product had no encryption capabilities and didn’t need a military export license, according to a ministry official who spoke on condition of anonymity because he wasn’t authorized to speak on the matter. The Tel Aviv shares climbed 6 percent to 62.87 shekels, or $16.78 today.

Hod Hasharon, Israel-based Allot’s equipment for monitoring Internet traffic was sold to Iran via a distributor in Denmark, Bloomberg News reported on Dec. 23. The Jewish state bans trade with Iran, which has called for its destruction.

Topping Forecasts

Mellanox Technologies Ltd., the Israeli adapter maker partly owned by Oracle Corp., soared 12 percent to 134.20 shekels, or $35.82, in Tel Aviv today. The U.S. shares fell 2.4 percent to $31.16 yesterday.

Fourth-quarter revenue surged 79 percent to $72.7 million, beating the mean estimate of 10 analysts surveyed by Bloomberg of $71.4 million. Mellanox reported earnings of 31 cents per share, above an estimate of 29 cents, the company said in a Business Wire statement yesterday after the markets closed.

--With assistance from Susan Lerner in Jerusalem. Editors: Marie-France Han, Emma O’Brien

To contact the reporter on this story: Tal Barak Harif in New York at

To contact the editor responsible for this story: Emma O’Brien at

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