The government will raise the minimum wage and roll back recent increases in water, public transportation and gasoline prices to ease the burden of soaring commodity prices and try to prevent a general strike, Prime Minister Binyamin Netanyahu announced on Thursday.
“There are signs of another crisis developing as commodity prices around the world are rising, which is also affecting prices in Israel. As a result, gasoline prices increase, as do the costs of transportation and food,” Netanyahu said at a press conference in Tel Aviv on Thursday.
After failed talks with PM, Histadrut prepares for strike
“We cannot control commodity prices. However, we can present responsible solutions for the current situation,” he went on. “The cost of the solutions we are presenting today must not break the budget ceiling.”
Netanyahu and Finance Minister Yuval Steinitz announced a number of easing measures following intense public pressure and threats by the Histadrut labor federation to call a general strike in the public and private sectors in two weeks. The measures, which will cost the government NIS 1.1 billion a year, will be supported by budget cuts of about 2 percent to government ministries across the board and by a one-year delay of the planned income tax reduction program for high-earning individuals.
As part of the package, the government will cut fares for public transportation, including buses and trains, by about 10%.
The measure will cost the government NIS 300 million a year.
“We want to encourage people to use public transportation in light of rising fuel prices,” the prime minister said.
In addition, Netanyahu announced that the decision to increase the gasoline excise by NIS 0.23 per liter, which went into effect on January 1, would be canceled altogether. As a result, the government’s revenues will fall short by NIS 760m. a year.
Furthermore, water prices for average usage, which have risen more than 30% over the past year, will be lowered. The government will increase the usage amount priced at the low tariff, and increase the rate charged for high usage.
Despite great opposition from the Finance Ministry, Netanyahu announced that the government would raise the minimum wage by a monthly NIS 450, to NIS 4,300 from the current NIS 3,850. The increase will be implemented in two stages.
“Solid growth, low unemployment and a consistent continuation of the government’s policy to lower the country’s debt-to- GDP ratio have enabled us to be more flexible in times like this,” Steinitz said. “We need to maintain this policy and refrain from breaking the budget ceiling so that we don’t end up like other countries such as Greece.”
Bank of Israel Gov. Stanley Fischer welcomed the new moves and emphasized the importance of preserving the budget credibility that Israel has attained in recent years.
“The steps which have been announced will enable the government to stay within the budget ceiling and will not increase the deficit,” Fischer said. “The adherence to strict budget discipline is crucial, in particular in light of the recent uncertainty emerging from the geopolitical situation in the Middle East.”
The Histadrut said on Thursday night that “the steps the prime minister announced are not clear, and there are still a lot of questions that need to be examined.”
The Histadrut said it would hold a meeting on Saturday night “to make a decision on how to proceed.”
Earlier on Thursday, the Histadrut had declared a work dispute, allowing the union to launch a general strike in two weeks, in protest of the government’s up-to-then refusal to raise the minimum wage and cancel recent tax hikes and increases in the price of water and bread.
Unwilling to let the chance for a good public struggle to slip through their fingers, opposition lawmakers were quick to belittle Netanyahu’s Thursday night announcement regarding price reductions for water, gas and public transportation.
Labor MK Shelly Yacimovich harshly criticized the government’s measure to implement cuts for all ministries, which she said would cause great harm to the public.
“An across-the-board cut of ministries’ budgets to finance a reduction in the gasoline excise will be a severe mistake and hurt the public even more,” Yacimovich said. “Education, health, welfare, police, and local government activity, which are already operated under difficult conditions, will be hurt. The only solution that is economically viable is to freeze the planned tax reduction reform, which in any case benefits the well-off and will widen social gaps and lower government revenues. As a result of the shortfall in state revenues, the government is levying indirect taxes, which are not justifiable, such as the tax on gasoline.”
Kadima immediately labeled Netanyahu’s announcement as characteristic of “a prime minister who has reached the end of his road.”
Kadima MK after MK focused on what they said was the prime minister’s incessant zigzagging and susceptibility to pressure.
“Once again this is a case of survival-based behavior by Netanyahu, who only makes decisions under pressure and panics when he understands that the chair under him is shaky,” MK Yoel Hasson (Kadima) said. “If he is so subject to pressure on economic topics, it is scary to think how he deals with security pressure. Bibi takes pride in his biennial budget, but after two months, he is already changing it in a hurried and disorganized manner. This is not a case of an organized policy or budgetary stability, but rather of a lack of policy and instability.”
Likud reactions were more positive. MK Tzipi Hotovely said “the prime minister’s decision to act with social sensitivity toward the weaker sectors was the right decision at this time. Raising the minimum wage alongside reducing water and gas prices met a pressing need in order to give the entire public breathing room.”
But MK Danny Danon’s (Likud) reaction was cooler. Yesterday, Danon said that “the Likud central committee calls on its elected members in the Knesset and the government to heed the social needs of the people and to lead a social revolution.”
Today, he toned down his rhetoric, congratulating “the prime minister for choosing a social direction.
“The plan is good, but insufficient,” Danon said. “I will continue to act to convene the Likud central committee for a debate and vote on the economic policy – water prices, gas and rising taxes – to ensure that the prime minister’s plan will really be carried out and not blocked by Treasury bureaucrats who have thus far held the finance minister by his nose and have caused this terrible situation that drains Israeli citizens’ wallets.”
Steinitz had been discharged on Thursday morning from Hadassah-University Medical Center in Jerusalem’s Ein Kerem neighborhood after being admitted to an internal medicine department on Tuesday night complaining of weakness.
He was found to have contracted influenza, and also to have gone 24
hours without food, drink or sleep due to disputes over changing the
state budget and reducing taxes and the prices of basic commodities.
According to Hadassah doctors, Steinitz was also suffering from a
sinusitis infection, so he was prescribed two antibiotics to treat it.Judy Siegel contributed to this report.