strike sign 88.
(photo credit: )
Word of the cuts included in Finance Minister Avraham Hirchson's proposal for the 2007 budget prompted the Histadrut labor union to threaten a full strike if no changes are made.
"If the Treasury does not take back its unilateral decisions and sit down in a fair manner for negotiations, we will not hesitate to close down the economy even before the [Economic] Arrangements Bill is passed," said Histadrut Chairman Ofer Eini.
Eini accused the Finance Ministry of keeping "more than NIS 20 billion in surplus revenues" to itself. "The Treasury... is acting like a private business that makes sure to maintain its profits, and not like a body that must serve the public," he charged.
"In the budget proposal, there are far-reaching reforms that harm workers' rights and wages through legislation, and there is an intention is to lay off thousands of workers, and all of this in a unilateral decision and without negotiations," said Eini.
Macro-economic analysts, however, were not unanimous in their criticism of the budget proposal.
"[Hirchson] is dreaming. This budget is unrealistic," commented Excellence Nessuah chief economist Shlomo Maoz.
The budget offers "no solution to the weaker [socio-economic] strata," and even the diversion of funding to the Defense Ministry budget will prove to be insufficient, Maoz said.
There was "no chance" that the deficit will stay under 3% of GDP, he added. Additionally inflation will grow "very strongly", by about 3.2% in 2007 and the shekel is likely to depreciate to NIS 4.8 per dollar on average next year, further driving up expenses, Maoz predicted.
Consequentially, the government will have no option but to raise taxes no matter what, so Israel's standard of living will deteriorate next year, he said.
Maoz also opposed cutting the railway budget. Increased investment in trains "is one of the best things that happened in the country in years. They must not [cut the railway development budget]," he said, adding that the Treasury should have cooperated with Israel Railways to find another source of funding, such as bonds.
On wages, however, Maoz conceded that "they can't raise minimum wage because there will be less jobs in any event, and raising the minimum wage will reduce the number of jobs further."
Inflation will raise to 9.2% by mid-2007, with 50,000 more Israelis looking for jobs, he predicted. "This has already begun."
IBI Chief Economist Ayelet Nir, on the other hand, praised the Treasury's decision to keep fiscal spending growth within the 1.7% cap. Maintaining such fiscal discipline now would help budgetary planning get back on track over the coming years, she said. - D.K.