Finance Minister Ronnie Bar-On's hopes of passing the 2008 state budget before the end of the year dimmed on Sunday night, as Finance Committee chairman Stas Miseznikov failed to reach agreements with government coalition chairman Eli Aflalo (Kadima) and State Budget director Koby Haber on a number of key issues, delaying the Finance Committee budget vote.
The Finance Committee budget vote had been initially scheduled for early Sunday evening. It had still not gotten under way by press time.
"Before the committee can convene to vote on the budget, Miseznikov must arrive at agreements with Aflalo and Haber, something that is proving to be a difficult task," the committee spokesman told The Jerusalem Post.
The sticking points centered around the Knesset's refusal to approve a number of major welfare decrees and cutbacks planned by Bar-On.
Labor, Shas and Gil Pensioners have objected to most of Bar-On's planed cuts, leaving Prime Minister Ehud Olmert without a majority to pass the budget.
Gil Pensioners reiterated its demand to increase National Insurance Institute payments as part of the Economic Arrangements Law, threatening to quit the coalition should that not happen. "We are taking this process to the end, and if that means that we have to leave the coalition, then that is the choice we will have to make," said a party statement.
If and when the budget is passed by the Finance Committee, it will then be sent to the Knesset plenum for a second and third reading.
The 2008 budget, at NIS 315.8 billion the largest in state history, was presented to the Knesset Finance committee in October by Bar-On, giving the Knesset its earliest start to budget discussions.
The largest expenditure item in the 2008 budget will be defense, at NIS 51.5b., making it the largest ever defense budget. Debt repayment will be the second largest item at NIS 34.6b., followed by the education budget at NIS 33.8b.
Government spending in 2008 will increase by 1.7% over 2007, resulting in a deficit of 1.6% of gross domestic product, up from 0.5% this year.
At the budget presentation, Finance Ministry director-general Yarom Ariav said the ministry expected 4.2% economic growth in 2008 (compared with 5.2% for 2007), with inflation expected to reach 2.3%, slightly higher than the mid-point of the Bank of Israel's 1%- 3% target range, while the shekel-dollar exchange rate is expected to reach NIS 4.30 to the dollar by the middle of 2008.
Included in the Finance Committee's budget vote is the decision on the Economics Arrangement Law, a package of laws always passed alongside the budget. The Economics Arrangement Law has in the past allowed the government to enact structural economic reforms that may not have received Knesset approval on their own.
The budget includes a package of structural changes, including legislation to increase competition in banking by widening the operations of the state-owned Postal Bank and to increase competition in public transportation by opening more bus routes to competitive bidding.
If the 2008 budget is not approved by the Knesset by December 31, the government will continue to operate under the 2007 state budget. If the budget is not approved by March 31, the government will fall and early elections will be scheduled.
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