Lapid seeks to reevaluate two-year budget
The two-year budget was a policy former finance minister Yuval Steinitz urged Lapid to continue.
Yesh Atid leader Yair Lapid and Bayit Yehudi head Naftali Bennett at Knesset swear in, Feb 5, 2013. Photo: Marc Israel Sellem/The Jerusalem Post
Yair Lapid on Monday, the very day he was sworn in as finance minister,
postponed a Tuesday Knesset discussion on using a two-year budget, but promised
that a bill extending the legal deadline for approving a new budget would move
By law, the government has 45 days from the time it is seated to
pass a budget for the year. Failure to do so would trigger new
Tuesday’s bill would extend that deadline to 85 days, with another 50 days for Knesset approval, which would set the new budget deadline for July 31.
Since the 2012 deficit
exploded to 4.2% of GDP, over double its original target, the once-praised
two year budget has become a political punching bag, with critics arguing it is
responsible for the imbalance.
“It cannot be that in a dynamic economic
reality, the budget will be set two years ahead of time,” said freshman Labor MK
Erel Margalit, who has made the biennial budget’s elimination his pet cause and
elicited State Comptroller Joseph Shapira to investigate the practice.
January, former finance ministry director-general Avi Ben-Bassat, whose name has
been floated to replace Bank of Israel governor Stanley Fischer, argued in an
interview with The Jerusalem Post that the government’s inability to accurately
forecast revenues two years ahead of time made the two-year budget
He argued that it reduced the government’s flexibility to
deal with changing circumstance.
“It doesn’t make sense for policy makers
to tie their own hands,” he said at the time.
Yet the two-year budget was
one of just a handful of policies former finance minister Yuval Steinitz urged
Lapid to continue.
When Israel introduced its first two-year budget in
2009, it received praise as an innovative approach that would cut the
accompanying annual political bickering in half while providing a degree of
certainty to both the public and private sectors as to the government’s
“Israel succeeded in overcoming the global economic crisis
because of the biennial budget,” Steinitz told the IMF in October, according to
Globes. “I think that it played a key role in stabilizing the economy, improving
performance, and improving the transmission from planning to execution of
While admitting that a degree of flexibility should
be introduced into the two-year budget’s implementation, Steinitz never
specified what kinds of adjustments would mitigate the deficit projection
Earlier in the month, the Finance Ministry submitted an
amendment to the budget law calling for both an extension in the deadline and
the use of a two-year budget with “technical adjustment,” though those
adjustments did not address the deficit related criticism.
Even if the
government decides to put an end to the two-year budget experiment, the fact
that 2013’s budget may not be in place until halfway through the year may lead
it to carve out a one-time exception. By July, the choice will be between a
half-year budget and a one-and- a-half year budget.
Lapid agreed to a
similar compromise in the coalition deal: he relented on a campaign promise by
allowing 22 ministers into the government on condition that future cabinets
would be capped at 18.