The cabinet approved doubling the 2013 budget deficit target to 3 percent of gross domestic product Sunday, despite strong opposition from central bank and Treasury officials. It also agreed to set a new long-term target of gradually reducing the deficit back to 1.5% by 2019.
“I think this is the right dosage,” Prime Minister Binyamin Netanyahu said at the opening of the weekly cabinet meeting. The revised target meets the European Union standard, he continued, pointing out that Germany is perhaps the only member state running a deficit of under 3%.
“What we are not doing is changing the expenditure target. In the end, what the government controls is the expenditure target, and we are sticking to that scrupulously as we have always done,” Netanyahu said.
He stated that certain “certain taxes” will be raised next year, and that other measures will be adopted in order to ensure both the expenditure and deficit targets are met. But, he added, “I did not want, not in 2003 when I was finance minister and not now,to increase the tax burden too much. When you increase the tax burden, you depress growth. And when you depress growth, you increase unemployment and ultimately increase the deficit."