Simcha Ehrlich, 67, deputy prime minister of Israel since 1979 and a member of Menachem Begin's Likud government since 1977, died June 19 at Bikur Holim Hospital in Jerusalem following a stroke.

Mr. Ehrlich was born in Lublin, Poland, and emigrated to Palestine in 1934. An activist in the Polish General Zionist Youth Movement, he began his political career with the Union of General Zionists. He was elected to the Tel Aviv Municipal council in 1955, became deputy mayor of that city in 1962, and relinquished these positions when elected to the Knesset, Israel's parliament, in 1969.

He was an industrialist by avocation, and established Israel's first eyeglass factory. Mr. Ehrlich rose in the ranks of the Liberal Party, becoming chief of the its national secretariat and chairman of its board of governors. The Liberal Party and Begin's Herut Party became the leading partners in the new Likud bloc. When Likud triumphed in Israel's May 1977 elections, ending nearly 30 years of Labor Party rule in Israel, Mr. Ehrlich was appointed minister of finance.

With Begin's support Mr. Ehrlich initiated a controversial economic program aimed at curbing the country's chronic inflation, then hovering at an annual rate of between 30 and 40 percent, by dismantling the socialist economy constructed by previous Labor governments.

Declaring that his program would make Israel the financial center of the Middle East, Mr. Ehrlich eliminated the rigid, three-tiered monetary exhange system for the Israeli pound, letting the country's currency float on the open market. Government subsidies for such basic commodities as fuel, transportation and food were slashed.

The hoped-for result was to be reduced domestic consumption and increased foreign investment in Israel. These factors, it was believed, would reduce Israel's trade deficit while strengthening its currency. But the program failed.

Implementation of the new policies prompted a series of strikes, including one by maintenance workers that shut down the Ben Gurion International Airport for 24 hours. Public employes, angered because the cuts in government subsidies had led to sharp price increases, were granted raises in salaries.

Although Mr. Ehrlich opened a new era in trade relations with South Africa, the anticipated onslaught of foreign investment failed to materialize. A year after his program was instituted, Israel's inflation rate remained essentially unchanged.

By 1979 annual inflation exceeded 60 percent and the country's foreign debt had reached $12.5 billion, nearly as much as its GNP. Under attack from opposition figures and some members of his Liberal Party, Mr. Ehrlich reportedly offered to resign from the government, but Begin dissuaded him.

In August 1979 Mr. Ehrlich became deputy prime minister and, in 1981, following his reelection to the Knesset, assumed the additional post of minister of agriculture. He had resigned his post as finance minister in 1979.

Mr. Erlich was regarded as a moderate in foreign affairs and as a key man in holding together a Cabinet divided over the events in Lebanon. He was a member of the ministerial coalition formed to oust Arial Sharon as defense minister following the massacre by Lebanese Christian militiamen of Palestinians in refugee camps last September.

In an interview on Israeli television in October 1982, Mr. Ehrlich said that a defense minister with a military background "seeks to take command of actual military operations, and disturbs the system of coordination between the civilian and military authorities."

But Mr. Ehrlich also criticized Israel's growing Peace Now movement, which opposed Israel's invasion of Lebanon, saying last May that the movement was a "passing phenomenon."

Survivors include his wife, a son, and a daughter.