Histadrut, Labor vow to fight cuts to workers' wages

The Labor Party and the Histadrut labor federation spoke out sharply on Tuesday as media reports suggested that Prime Minister Binyamin Netanyahu was planning a severe austerity budget that would eat into their interests.

Histadrut chairman Ofer Eini vowed to “fight to the death” any cuts to workers’ salaries, saying “the Histadrut will not allow the reduction, not even by a single shekel, of workers’ money.”

He added that any attempt to undermine the National Labor Court, which the Federation of Israeli Chambers of Commerce has called “extremist,” would undermine Israel’s democracy and rule of law.

Labor leader Shelly Yacimovich blasted Netanyahu for his “secret” plan, saying “anyone who cooperates with him in a government will be judged by the middle class and the poor, who will be the direct victims of his plan.”

Despite the reactions, the exact outlines of the overdue 2013 state budget remain unclear, a fact highlighted by the vast disparities in the media reports. Reported plans ranged from NIS 15 billion to 30b. in cuts and variously cited raising revenue by increasing VAT and inheritance tax, closing loopholes or simply keeping taxes steady. With coalition negotiations not yet officially under way and the deadline for sealing a budget deal being 45 days after the next government is installed, that is not surprising.

But some budgetary facts of life remain clear.

According to the spending law, Israel must cut NIS 14b.-15b. from next year’s budget, and possibly raise taxes to meet its deficit goals. Given that a budget will not likely pass for a few months, the government will try to pass a plan covering the rest of 2013 and 2014. That will help them avoid rehashing the same arguments again just a few months after it finishes the current process. The extended budget period accounts for some of the higher figures being thrown around in the media, both for tax increases and spending cuts. In any case, those cuts will not be easy.

“We have two options – either go on this way and be like Spain and Greece, or we cut, and we cut from the living flesh of us all,” economic analyst Nehemia Shtrasler told Army Radio on Tuesday.

According to Globes, one of the main proposals for cutting spending is reducing public sector salaries, pulling back big pay hikes and benefits to keep them in line with stagnant private sector salaries. That would save NIS 1b. (3b., according to The Marker), but undo the 1 percent increase included in the collective agreement signed with the Histadrut in 2009.

But public sector salaries are far from the only area being considered for cuts. Budgets across the board would also need to be reduced, and Finance Minister Yuval Steinitz specifically cited the Defense Ministry on Monday as one target. Yediot Aharonot cited a plan that included canceling long-term programs for transport, including building intercity roads and a subway in the Dan region, scaling back housing construction, and cutting back payments to the National Insurance Institute.

Netanyahu is said to be consulting on the budget with a team including Finance Ministry budget director Gal Hershkowitz, Prime Minister’s Office director-general Harel Locker, and Ori Yogev, a close adviser to the prime minister and a former budget director.

Yogev was a key figure the 2009- 10 budget process, where he worked closely with Eini.

Hershkowitz aroused surprise when he dismissed his deputy Eyal Epstein, the man largely responsible for overseeing the budget process, this week.

“The second the Treasury leaders are unable to create a policy that will fix the problem, they start to fight among themselves, because they don’t have faith in one another,” former Finance Ministry accountant-general Yaron Zelicha told Army Radio on Tuesday.