Fischer praises Lapid’s ‘brave’ budget proposal

Organizers of 2011 tent protests planning to take to streets again to protest cuts and tax hikes in Lapid’s budget proposal.

Lapid and Fischer 370 (photo credit: courtesy ministry of finance)
Lapid and Fischer 370
(photo credit: courtesy ministry of finance)
Bank of Israel Gov. Stanley Fischer on Thursday labeled Finance Minister Yair Lapid’s budget proposal “brave,” saying that despite its complex reorganization of both revenue and expenditure, it sets a responsible fiscal path forward.
“As I said when I expressed support for putting the deficit for 2014 at 3 percent, the decision requires painful steps. Naturally, the broad public feels the impact that every household in Israel will experience as the result of the implementation of the program. However, it’s important to remember that we cannot meet a budget challenge while only focusing on this sector or that population,” Fischer said.
“As the finance minister said, the entire public will have to bear the burden. At the end of the day, restoring fiscal stability will strengthen the economy’s resilience to shocks, help the economy realize its growth potential, and support the public’s welfare as a whole.”
The governor also said that if the government decided to increase the defense budget, it would have to find a way to offset the cost in order to maintain the overall budgetary framework. Lapid and Prime Minister Binyamin Netanyahu are scheduled to hash out plans for the defense budget on Sunday, ahead of a Monday cabinet vote on the overall proposal.
Meanwhile, the organizers of the 2011 tent protests are planning to take to the streets again on Saturday evening to protest the cuts and tax hikes in Lapid’s budget proposal.
Several hundred people protested outside Lapid’s home in the Ramat Aviv neighborhood of north Tel Aviv on Thursday night.
The Ma’abara (“Transit Camp”) and Lo Nehmadim (“Not Nice”) groups called, on social media, for a large demonstration at Habimah Square in central Tel Aviv on Saturday night.
Some 10,000 people said they would attend the protest in Tel Aviv, on a Facebook event page created by the organizers.
“We are students, young families, people who have a hard time to pay the bills. We don't see anything new in this budget, or any reason for hope,” the organizers wrote on Facebook.
“I don't think the goal is reach an X amount of people, but rather to create a joint stance against moves that are going to hurt a lot of people,” Daphni Leef, one of the 2011 summer protest organizers, told Channel 2.
Former tent protest leader MK Stav Shaffir (Labor) wrote on her Facebook page, “Lapid’s definition of ‘hope’ is very odd. You wouldn’t want to include it in the lyrics of the national anthem, especially not the part about raising VAT by 1% to 18%, and definitely not the clause which describes how a 1.5% hike on ‘everybody’s’ income tax contributes to Israel’s economy.”
Earlier on Thursday, Lapid garnered the support of President Shimon Peres, whom he presented with a copy of the proposed state budget in accordance with the law and tradition.
“We’ve entered a deep pit and we’ve made a steadfast decision not to ignore the situation, but to do the right and difficult thing in order get out of the pit in the fastest possible time,” Lapid told Peres.
“You could have picked an easier job,” remarked Peres, who commended Lapid for not having flinched from such a difficult situation.
Peres recalled that when he was prime minister in 1984, he had to cope with an inflation rate of 450%.
“It wasn’t easy. I caused a lot of disruption and discontent to many sectors of the population – not out of pleasure, but out of need,” he said. “I was subjected to a lot of criticism. It could not be accomplished without difficulty, but within nine months inflation dropped from 450% to 16%.”
After that, said Peres, his critics became his supporters.
Inasmuch as he has to take a tough stance, said Lapid, he will create a safety net for the weakest sectors of the population.
Mindful of how children and the poor will be affected by cutbacks in allotments and increases in taxation, the president said that no one will complain without reason, but when there’s a crisis, everyone has to be recruited.
“If you do the right thing, the results will come quickly. You’re not imposing cutbacks forever,” Peres said.
Despite the encouraging words, plenty of critics remained.
The heads of the hi-tech industry called an emergency meeting for Sunday over cuts to the budget of the Chief Scientist’s Office in the Economy and Trade Ministry, which will reduce the budget from NIS 1.57 billion to about NIS 1b. Even Peres, who places a lot of faith in what science can do for the economy, alluded to the reduction, saying that there was correlation between cutbacks and scientific innovation.
Fresh off announcing a deal with Lapid, Histadrut labor federation chairman Ofer Eini called the budget cuts “draconian,” and said the union would gladly participate if new social protests broke out.
The Finance Ministry officials, he complained in an Army Radio interview, “have a thesis that says you have to cut into the flesh, and they operate as though they have all the wisdom.”
Corporate tax could have been raised 3 percentage points instead of 1, Eini said, and the 1.5 percentage point income tax hike could have been spread out progressively.
“This isn’t the government I hoped for, but there is a democracy in Israel and this is what we got,” he said.
Though he prevented greater cuts to public workers, Eini said, “I do not see the agreement as a victory.” For a political novice, Lapid was a surprisingly able negotiator, he said.
Knesset Finance Committee chairman Nissan Slomiansky late on Wednesday night praised Lapid for striking a deal with Eini, but criticized him for placing too much of the burden on the middle classes.
“In my opinion, we shouldn’t overlook the very deep pockets of the big companies,” Slomiansky said, promising to take action in the committee to distribute the burden more evenly.
Meanwhile, Economy and Trade Minister Naftali Bennett announced a plan to ease the regulatory burden on small- and medium-sized businesses by giving them a 90% discount at the Standards Institute.
Businesses are required to buy packages outlining all the standards their particular business must meet, a cost Bennett said was overly burdensome.
“We promised to open the clogs in the Israeli economy, and this is an important step in that direction,” Bennett said.
The institute will also cut red tape and provide clearer guidance and support for entrepreneurs, and create an online system to increase access.
Globes and Jerusalem Post staff contributed to this report.