Prime Minister Binyamin Netanyahu is considering several different options for cutbacks that could enable passage of the 2013 state budget and avoid elections, sources close to him said Wednesday.

NIS 13 billion to NIS 17b. would have to be cut in order to meet the budget’s deficit target of 3 percent, according to Bank of Israel governor Stanley Fischer.

The Treasury has proposed cutting NIS 6b. from the defense budget, NIS 4.5b. from infrastructure and transportation projects, and NIS 2.5b. from welfare payments, as well as cutting salaries and benefits of public sector workers.

In an effort to appease his coalition partners and pass the budget, Netanyahu has reportedly agreed to reduce the cut to the defense budget to NIS 3b, and the cut to welfare payments – which are important to Shas – to NIS 1b.

The main infrastructure projects to be cut involve new railway tracks and widened streets in the periphery.

Another possibility is across-the-board cuts, although less from key socioeconomic ministries.

If the budget is not passed and early elections are initiated, the government would function according to the current budget, which was passed in December 2011.

The 2013 state budget will be the current government’s first single-year budget, following the biennial budgets of 2009-10 and 2011-12.

In July, the cabinet approved a series of tax hikes it hoped would raise at least NIS 14b. next year and reduce the deficit by 1.5%.

The value-added tax rose by one percentage point to 17%, on September 1.

All income between NIS 14,001 and NIS 41,830 per month will be taxed an extra 1%, and all income above NIS 67,000 per month will be charged a 2% surtax next year.

The Bank of Israel believes the economy will grow by 3.3% this year.

However, the firm Harel Finance rebuffed that forecast on Wednesday, predicting that economic growth would slow to as little as 2.7% in the event that the government bypasses the 2013 budget and calls early elections.

Nadav Shemer contributed to this report.

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