Finance Minister Yair Lapid continued laying the groundwork for tough budget
cuts through the Passover holiday, posting a video on his Facebook account in
which he promised to make “hard” and “unpopular” decisions.
“This will be
a long path and an unpopular path, and I’ll make the hard decisions because
that’s what you sent me here to do,” Lapid said.
The video, in which
Lapid compared his choices to those Moses had to make, followed several days of
statements by the Yesh Atid leader preparing the public for difficult cuts.
However, despite his comments on Saturday that the fiscal situation was “worse
than I expected,” and his Monday comments that economic data had him “very
worried,” the fundamental fiscal picture has changed little in recent
On Sunday the Bank of Israel noted that, legally, “the government
must reduce the commitments by about NIS 13 billion” for the 2013 budget. It
also pointed out that the budget deficit racked up between January and March of
this year was already NIS 4.1 billion higher than expected for staying within
the annual deficit target.
In a note linking how the deficit could affect
the real economy, it added that “deviation in the government deficit is liable
to lead to increased interest rates in the economy.” Raising interest rates
would further boost the shekel, whose strength has dampened Israel’s exports by
making its goods less competitive on the global market.
spokesman denied that any specific numbers had been agreed upon for how to
reduce the deficit, several Israeli media outlets over the weekend reported
tentative figures for programs that are likely to be cut with the agreement of
Prime Minister Binyamin Netanyahu.
According to Yediot Aharonot, the defense budget
would be reduced NIS 4.5b., child allotments would be cut by NIS 3.5b., and
other public sector spending would be scaled back NIS 3b. On the tax side the
paper reported that NIS 10b. worth of exemptions would be canceled, creating a
NIS 22b. overall package of spending cuts and tax increases for
Economic expert Eytan Sheshinski said Wednesday that tax
exemptions were an area ripe for pulling in new revenues.
Army Radio, Sheshinski said that the overall level of exemptions added up to NIS
40b. and included a VAT exemption on fruits and vegetables that costs the
government NIS 1-2b.
The beginning of a new government term may be “the
right time to overcome the political hurdles in order to reduce the tax
exemptions,” he said, adding that changes to the capital investment law could
also help direct government money more efficiently.
Tel Aviv University’s
Eran Yashiv agreed that it would be difficult for Lapid to completely shield the
middle class from tax increases, as the finance minister had promised in his
party’s election campaign – a fact that politicians from the opposition picked
up on as well.
“What happened to the Shas of the middle class?” asked
Labor MK Itzik Shmuli, using one of Lapid’s election slogans.
of the matter is that the standing of the middle class, and within it young
couples, will be even worse because Lapid and Netanyahu are basically the same
Meretz asked the opposition to gather 25 signatures in order to
call a special recess-period session on the potential cuts.
sectors and middle class don’t have the luxury of refraining from watching over
the Knesset, over the steps and cuts that Finance Minister Lapid is planning in
order to close the monstrous deficit created by the failed policy of Netanyahu
and the Right,” said Meretz chairwoman Zehava Gal-On. •
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