Netanyahu cabinet 311.
(photo credit: Ariel Jerozolimski)
The biennial state budget 2011-2012 was not yet approved by the cabinet late Thursday night after more than thirteen hours of debate including fierce opposition to lower defense
spending. The cabinet was scheduled to reconvene Friday morning at 8am to continue hammering out a deal.
The two-year budget 2011-12 is believed to have the support of
Prime Minister Binyamin Netanyahu, Bank of Israel Governor Stanley Fischer and a
majority of ministers.
In an all-night session that began Wednesday
night, the cabinet discussed plans to raise indirect taxes to finance
in education and welfare while curbing defense spending. The main
centered around the cuts in defense spending fiercely opposed by Defense
Minister Ehud Barak and Labor ministers.
Meanwhile, the Histadrut Labor
Federation reached a number of concessions related to old-age benefits.
Opposition was also raised against the Treasury’s plan to delay by one
planned increases in child allowances provided by the National Insurance
“I know we can reach a solution that can
help maintain the defense budget while advancing education, higher
welfare,” Barak said in the cabinet meeting.
Social Welfare Minister
Isaac Herzog criticized plans to freeze a rise in child welfare
saying, “Everyone likes to talk about poverty, but no one likes the
He called the decision mistaken and warned that it would distance
Israel from its goal of diminishing the gap between rich and poor, as it
promised the OECD.
Labor’s kibbutz and moshav sectors threatened to
convene the party’s institutions to vote on leaving the government to
cuts that affected their communities, which they said was a violation of
Agriculture Minister Shalom Simhon, who heads
Labor’s moshav sector, boycotted the cabinet meeting in protest.
ministers, who usually vote against the budget, were expected to abstain
return for NIS 1.2 billion for Shas chairman Eli Yishai’s Interior
benefits for Ariel Attias’s Construction and Housing Ministry. The raise
Interior Ministry budget will go to local authorities and firefighters,
The Finance Ministry is proposing to narrow defense
spending by NIS 1.4b.
from the demanded increase of NIS 3.4b. over two
years. At press time, sources close to the Finance Ministry were
having majority backing from the cabinet ministers.
presentation of the proposal of the two-year budget last week, Steinitz
ministers that a failure to moderate defense spending would necessitate
painful cuts in the budgets of other ministries, including education,
Speaking at the start of the cabinet meeting Thursday morning,
Netanyahu said there had to be a balance between the importance of
control of expenditure and the need to invest in education and social
“The story of the Israeli economy’s success in the last decade
stems from the fact that we took control of expenditures and enacted
took other steps to increase both revenue and competitiveness.
continue this tradition,” he said. “We also have needs such as education
social needs. We also know that we are in a threatening environment and
Netanyahu said the government was trying to achieve
a comprehensive solution by the new fiscal rule, which led to a certain
restraint that is, to a certain degree, less than what is customary in
“The reason for this is mainly that the sum of their
sins in the past decade is greater than ours,” he said. “Our formula
allows us a
certain space, but not beyond what the formula says. We have no
deviating from the budgetary parameters we have set. We must stick close
and today [Thursday] we will make a decision according to the budgetary
framework that we set according to the new fiscal law.”
According to the
new fiscal rule, spending will increase in real terms by 2.7 percent in
2012 compared with 1.7% in previous budgets, Steinitz said.
deficit for the budget is 3% in 2011 and 2% in 2012.