PM, Steinitz reaffirm need to restrain expenditure

Finance minister warns that the global economic “crisis” worsening and declares it “an economic world war.”

By NADAV SHEMER
June 12, 2012 17:24
2 minute read.
Finance Minister Yuval Steinitz

Finance Minister Yuval Steinitz 370. (photo credit: Marc Israel Sellem)

 
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Prime Minister Binyamin Netanyahu and Finance Minister Yuval Steinitz on Tuesday reiterated their intention to restrain budget expenditure during separate speeches to a business-sector conference in Tel Aviv.

Israel’s economy remains “very strong” despite global challenges, Netanyahu said in a prerecorded message to the Federation of Israeli Chambers of Commerce’s annual Economix conference. In an effort to maintain this position, he said, the government would maintain “budgetary discipline” while continuing to encourage the business sector, which he called the “force that powers the Israeli economy.”

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Netanyahu stressed the importance of education, saying: “Education must assist the economy, and the economy must assist education.

Education without a free economy will not get very far, and a free economy without education will not realize its full potential. Therefore, we must integrate education and the economy in an intelligent manner.”

Steinitz, who spoke following the broadcast of Netanyahu’s speech, warned that the global economic crisis was worsening and called it “an economic world war.”

“Israel’s fear is different from Europe’s fear,” he said. “If, heaven forbid, we end up in the same situation as Greece or Spain, nobody in the world will rescue us. Therefore, we must be far more cautious.”

Steinitz reiterated that Israel’s economy is in a stronger position than that of other countries. Even China and India are experiencing a slowdown, he said.

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The government would continue to prioritize the two goals of maintaining strong growth and low unemployment, Steinitz said, adding that it would not allow “cheap populism” and the social-justice protest movement to cause damage.

The conference took place as Treasury staff continue to work on 2013 budget preparations. Media reports have suggested the budget will include large-scale spending cuts and tax increases to compensate for a multi-billion-shekel revenue shortfall this year, although Netanyahu has indicated that the government will not make any drastic changes to existing budget policy.

Vice Premier and Kadima chairman Shaul Mofaz weighed into the debate during his speech, proposing that the government introduce differential VAT on basic products.

“We cannot demand that the middle and lower classes continue to pay a hidden tax on basic products, even though it is easy to collect,” he said.

“I am sure that this matter will be dealt with during the current budget discussions.”

Prof. Manuel Trajtenberg, who headed the committee established by the government in response to last year’s protests over socioeconomic issues, said taxes must be raised “permanently” rather than gradually.

Israelis bear a lighter tax burden than their counterparts in other OECD nations, he said, adding that taxes must be raised in a controlled manner, without removing business incentives or expanding inequality.

Trajtenberg urged the government to focus its immediate efforts on funding universal education, and the next priority must be to boost employment.

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