Budget deadline to complicate coalition talks

Once seated, government has just 45 days to solve nation’s financial issues; outstanding issues include budget, Tal Law.

By
January 24, 2013 02:03
2 minute read.
Likud MK Reuven Rivlin

Likud MK Reuven Rivlin. (photo credit: Marc Israel Sellem / The Jerusalem Post)

 
X

Dear Reader,
As you can imagine, more people are reading The Jerusalem Post than ever before. Nevertheless, traditional business models are no longer sustainable and high-quality publications, like ours, are being forced to look for new ways to keep going. Unlike many other news organizations, we have not put up a paywall. We want to keep our journalism open and accessible and be able to keep providing you with news and analyses from the frontlines of Israel, the Middle East and the Jewish World.

As one of our loyal readers, we ask you to be our partner.

For $5 a month you will receive access to the following:

  • A user experience almost completely free of ads
  • Access to our Premium Section
  • Content from the award-winning Jerusalem Report and our monthly magazine to learn Hebrew - Ivrit
  • A brand new ePaper featuring the daily newspaper as it appears in print in Israel

Help us grow and continue telling Israel’s story to the world.

Thank you,

Ronit Hasin-Hochman, CEO, Jerusalem Post Group
Yaakov Katz, Editor-in-Chief

UPGRADE YOUR JPOST EXPERIENCE FOR 5$ PER MONTH Show me later Don't show it again

Putting a government together is hard enough, but the freshly elected Knesset faces an additional challenge: passing a budget.

Normally, a new Knesset isn’t tasked with passing a budget right away – because it is already working with the budget passed in the previous year by the last Knesset – and has until the end of the calendar year to put a new budget together.

Be the first to know - Join our Facebook page.


But because the last government failed to pass a budget for 2013, which was the issue that led to early elections to begin with, the requirements are different.

By law, the government has only 45 days from the time it is seated to pass the year’s budget; otherwise, new elections are called and the process starts all over again.

Speaking to Israel Radio on Election Day, Knesset Speaker Reuven Rivlin said the parties would have to form a strong coalition to ensure that new elections aren’t required.

He noted, pessimistically, that in addition to solving the budget crisis, they would also have to work out their differences vis-a-vis a replacement for the “Tal Law,” which deals with haredi enlistment into the military and civilian service, and the diplomatic process with the Palestinians.

“Usually there’s a longer period of time. Here they don’t have that luxury. They have to decide on very big things very quickly,” Finance Committee spokesman Eyal Katzir explained.



Complicating matters further, Israel has a spending law which limits how much its overall budget can go up from year to year. The last government overshot that target by about NIS 15 billion, meaning that the starting point of the budget is already in overdraft and must be cut.

A Wednesday report in Yediot Aharonot also said that an unreleased Bank of Israel document on the budget explicitly called for further cuts and tax increases to bring the deficit in line as well.

Some analysts say the election’s new political realities portend a good outcome for the budget.

“The makeup of the budgetary cuts and their effects on the various classes will be determined by the partners in the new coalition,” said Ofer Klein, head of the Economics and Research Department in Harel Insurance and Finance.

“The strengthening of the Center parties increases the chances of changing the budget to a more pro-growth one,” he continued, adding that he didn’t believe a far-Right or far-Left coalition was likely.

Ronen Mizrahi, the director of investment strategy at Mizrahi-Tefahot Bank, said that international investors will also be paying careful attention to Israel’s budgetary process.

“The diplomatic, social and economy lines that [the new government] adopts will be closely monitored by foreign investors,” he said. “In particular, elections were moved up over a budgetary deterioration, so this is the first and immediate issue for which we will have to find an appropriate solution.”

But until a budget does pass, there will be consequences on the ground as well.

Unlike the United States, where failure to pass or extend a budget with a continuing resolution shuts down government operations, Israel has an automatic mechanism that kicks in. Ministries are forced to work on a monthly budget, equivalent to a 12th of their annual allotment from the previous years.

Not only are ministries prevented from embarking on new projects until the new budget passes, but they are also forced to work with one month’s worth of money at a time, a situation that can severely curtail their operations and make the government less efficient overall.

Related Content

The Teva Pharmaceutical Industries
April 30, 2015
Teva doubles down on Mylan, despite rejection

By GLOBES, NIV ELIS