Strike immobilizes Israel. Workers close shops, airport, and government offices in day-long protest against austerity plan

Israel was all but immobilized by a nationwide strike yesterday. The strike, called by the giant Histadrut trade union federation, was in response to the government's draconian economic measures announced Monday.

Israel's international airport shut down. No newspapers were published. Supermarkets, post offices, government ministries, and banks closed their doors. Radio stations went off the air except for periodic news broadcasts and members of the Israeli parliament were refused food in their own dining room.

What has enraged the Histadrut are the results of a 21-hour Cabinet meeting that ended Monday morning.

When the bleary-eyed Cabinet ministers finally emerged from their marathon session, they had voted what amounts to a 30 percent reduction in most wages. They had suspended, at least temporarily, the system of linkage that for decades has protected the Israeli workers' wages from the ravages of inflation by adjusting salaries upward every month.

The ministers also approved a $1.3 billion budget cut, according to Amnon Neubach, the prime minister's economics adviser. They devalued the currency by nearly 20 percent and drastically cut subsidies, raising the prices of basic foods as much as 75 percent. They raised the price of gasoline, electricity, and water.

Adding insult to injury, the government adopted the new measures by emergency decree -- a device that has never been used for economic purposes. The economic decrees bypass the parliament, where past efforts at budget trimming have always seemed to get bogged down in endless committee debates.

Mr. Neubach concedes that the steps taken so far will not fundamentally restructure Israel's economy. But he insists they will go a long way toward ``creating an atmosphere where more fundamental steps can be taken.''

The immediate impact of the measures, Neubach says, will be to sharply increase the monthly inflation rate for the next two months. But if the policies are carried out -- and in Israel, the implementation of government decisions is always an uncertain prospect -- inflation will plunge sharply to 4 percent or 6 percent a month by September, the economist says.

However, the Israeli public remains skeptical and frightened.

One Jerusalem nurse and her husband both were on strike Tuesday, but doubted the value of that action.

``I think probably it is just a wasted day,'' the woman said. ``But the people don't know what to do. They feel helpless, so they strike.''

Should Histadrut General Secretary Yisrael Kessar fulfill his pledge to unrelentingly fight the government measures, Israel can expect a long, hot summer of strikes. Perhaps more important, he will be able to pressure Prime Minister Shimon Peres, whose power base is the Labor Party-controlled Histadrut, to rescind some of the tougher measures that call for the firing of some 10,000 public sector workers and a mandatory 3 percent wage cut for all government employees.

Neubach insists that the alternative to all the measures being implemented was a national economic disaster.

``If we really keep all the elements in the plan, do exactly what we decided to do, then we will really break one of the essential causes of inflation -- the linkage between salaries and price increases,'' Neubuach says. ``These steps were taken because we had run out of time.''

Prime Minister Peres went into the Cabinet session Sunday vowing that the government would emerge only after it had taken drastic action to remedy the country's economic malaise.

Gone was his conciliatory talk of building a consensus among industrialists, trade unions, and the government. Peres, who recently has been increasingly criticized within his own Labor Party for failing to lead, was now accused of ruling by fiat. He warned that if the economic policy proposed by Finance Minister Yitzhak Modai was not adopted, the government would dissolve.

The atmosphere of impending crisis was so absorbing that Sunday's freeing of the 39 American hostages held by Shiite Muslim gunmen in Beirut for 17 days went by relatively unremarked upon.

So too did the government's announcement Monday night that it would release 300 Lebanese prisoners by today. The prisoners are part of a group of 735 whose release was demanded by the Shiite hijackers who took the Americans hostage. Government officials insisted, however, that the Americans' release was not linked to the hijackers' demand.

By the time the release was announced, most Israelis were reeling from the government's announced economic decisions.

Peres met with members of the Labor Party at the Knesset yesterday to defend his decisions.

``What destroyed the economy was inflation,'' he told the group. ``What made the rich richer was inflation. . . . The choice is between cutting the wages of workers or cutting the workers.''

In the end, the Labor Party faction of parliament voted unanimously to support the government's proposals, with the proviso that the amount of wage erosion would be negotiated further with the Histadrut. The Histadrut represents some 80 percent of Israel's labor force and its industries employ one-quarter of the nation's workers.

``The prime minister has changed his policy from a policy that tries to come to a consensus between the three sectors to one where the problems are solved by governmental policy,'' said Neubach.

Aides close to Peres say his transformation was inspired by a feeling that he simply had no other choice. Since the ``national unity'' government, wedding Labor and the opposition Likud bloc, was formed last fall, it has glaringly failed to halt the economy's deterioration.

A succession of ``package deals'' to control wages and prices had temporarily slowed down inflation, which had passed 1,000 percent annually this time last year. But a second package deal had all but collapsed by last week, when the manufacturers pulled out. Inflation was on the rise again and foreign currency reserves were falling, and there was no sign of a turnaround in the economy.