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Treasury plans defense, public sector salary cuts

July 29, 2012 15:24

Finance Ministry is looking to close an NIS 15m. budget hole, but will likely put gov't on collision course with Histadrut.

PM Binyamin Netanyahu with Yuval Steinitz

Netanyahu Steinitz 390. (photo credit:Reuters)

The cabinet on Monday will be asked to approve a fiscal package that includes billions of shekels in tax hikes, but the austerity measures do not end there, it was revealed Sunday. As "Globes" reported on May 21, the Ministry of Finance is planning billions of shekels in cuts to government ministries' budgets within weeks, because of breaches of spending frameworks.

Excess spending already totals NIS 15 billion. The cut in ministries' budgets will reportedly total NIS 5 billion. However, it should be noted that the government recently passed a NIS 700 million across-the-board budget cut, which will be increased to NIS 1 billion in 2013. An already planned NIS 500 million budget to the 2013 budget should be added, so that the excess spending, after the budget cuts, is currently NIS 13.5 billion. According to Ministry of Finance estimates, the tax hikes will generate NIS 12 billion in revenues in the 2013 budget.

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The Finance Ministry plans to keep unchanged the budgets of the Education Ministry, the Social Services Ministry, and the Energy and Water Resources Ministry, and is focusing on cutting the defense budget, as well as cutting welfare payments and reducing salaries of government employees, which is liable to put Prime Minister Binyamin Netanyahu and Minister of Finance Yuval Steinitz on a collision course with Histadrut labor federation chairman Ofer Eini.

The cuts will not be on the agenda of tomorrow's cabinet meeting, which will approve the tax hikes.

The biggest budgets which can be cut without affecting critical services are defense, welfare payments, infrastructures, and public sector salaries. These items account for 40% of total budget spending. As "Globes" reported in late May, the Finance Ministry is also considering delaying the subsidies for daycare for children aged 3-9 (one of the Trajtenberg Committee recommendations).
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