Bar-On rejects easing fiscal targets

"I fear that a policy of easing short-term fiscal discipline will lead the Israeli economy backward by years," said Finance Minister Ronnie Bar-On.

Ronnie Bar On 88 224 (photo credit: Ariel Jerozolimski)
Ronnie Bar On 88 224
(photo credit: Ariel Jerozolimski)
Finance Minister Ronnie Bar-On rejected calls at an economic conference today for the government to ease its budget spending limits and delay its target for reducing debt. "The recommendation by the Caesarea Forum to increase fiscal spending by an additional 1 percentage point and at the same time delay by at least five years the goal of cutting the ratio of debt to gross domestic product to 60% doesn't allow us to reach the goals I seek," Bar-On said today at a conference on the economy in Eilat. The Forum, an annual meeting of Israeli economic policy makers, said in a report today that if spending is not increased public services may suffer. Its call increases pressure on the government, which is facing demands for early elections and may have trouble winning parliamentary support for its budget plans. "The combination of political uncertainty, the geopolitical situation and economic challenges creates a complicated situation vis-a-vis approving the budget," Bar-On said. "I fear that a policy of easing short-term fiscal discipline will lead the Israeli economy backward by years." Fiscal discipline is critical for Israel to encourage foreign investment and ensure that economic growth is "kept separate" from politics, Bar-On said. Last week, Bar-On was forced to withdraw a plan to cut taxes and end a tax exemption on certain investment funds after unions said they would strike. He said he was now preparing a "reduced" alternative plan. The government is committed to limiting spending growth to 1.7% a year after inflation and to reduce the debt to GDP ration by 20% to 60% by 2015.