Finance minister expects cuts to defense spending

After delivering keynote speech at record-breaking Israel Bonds fundraiser, Steinitz predicts defense cuts to close NIS 14b. deficit.

By REUTERS,
January 29, 2013 02:54
3 minute read.
An IDF exercise in the South

An IDF exercise in the South tanks helicopters 311 (R). (photo credit: Reuters)

 
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Finance Minister Yuval Steinitz, fresh from a record-setting sale of Israeli bonds to investors in Florida, said on Monday that balancing the government budget will require "moderate but still significant" cuts to the defense sector.

Steinitz, a leading member of the weakened Likud party of Prime Minister Binyamin Netanyahu, also said there are no plans to further raise taxes in order to hit a deficit target of 3 percent of economic output.

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Parliamentary elections last week returned Likud to the top spot in the 120-member assembly, albeit with 11 fewer seats.

One area "that we will have to make some moderate but still significant cuts is the defense budget, I assume. It is not easy but we did it in the past," Steinitz said during a stopover in New York before flying home.

Israel spends roughly 20 percent of its budget on defense. It has to find a way to close a 14-billion-shekel deficit.

Steinitz stuck with the 3.5 percent gross domestic product growth target this year, rising from 3.3 percent in 2012. He added that it would not be a surprise if economic growth touches 4 percent in 2014.

The debt-to-GDP ratio is expected to decline to somewhere in the 73-percent range, down from 74.1 percent in 2011, he said.



One main reason for expecting an economic rebound is the return of cheaper natural gas to power Israel's industry as the Tamar natural gas field off the Mediterranean coast comes online in April. Egypt stopped supplying cheap gas in early 2012.

Israel Bonds, the company which underwrites Israeli debt securities, broke records when it raised $230 million in one night, almost 30 percent of its total annual intake of $800m.

“The impressive amount raised again demonstrates the resilience of the Israeli economy and the strength of the North American Jewish community’s connection to the State of Israel,” said Steinitz, who delivered the keynote speech at the fundraising event in Boca Raton.

On Monday, the Finance Ministry also announced that it would issue 10-year and 30- year dollar-denominated bonds. Israel issued $1.5 billion in 10-year bonds in both 2012 and 2010.

Steinitz praises Lapid, Bennett, takes jab at Yacimovich

Steinitz on Sunday night praised the leaders of two rival political parties – Yesh Atid’s Yair Lapid and Bayit Yehudi’s Naftali Bennett – for their economic credentials, as speculation swirled regarding who Prime Minister Binyamin Netanyahu would ally with in the next government.

“The results of the elections in Israel are reasonable from an economic perspective,” Steinitz said at an Israel Bonds fundraising meeting in Florida. “It seems that Lapid and Bennett support rational economic policy, setting economic growth atop their priorities and not calling for imposing excessive taxes.”

While Lapid’s party is widely expected to be part of the next coalition, Netanyahu has worked to dispel rumors that he would refuse Bennett a spot.

In a jibe at Labor leader Shelly Yacimovich, whose economic policy he continuously derided throughout the campaign, Steinitz specifically praised Lapid and Bennett for “not engaging in economic populism.”

Yacimovich had her own harsh words for Steinitz, criticizing him and the prime minister for the country’s inflated deficit.

“In every civilized country, the finance minister would have long ago drawn conclusions and submitted his resignation over the resounding failure,” she said on Monday. “Only in the Netanyahu government would that same minister, who also sees himself as the natural candidate for the job, continue the destructive policy that he led in the past four years.”

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