After outcry, PM rethinks budget cuts

Netanyahu orders cancellation of welfare reductions that would hurt handicapped, Holocaust survivors.

Netanyahu under pressure 248.88 (photo credit: Ariel Jerozolimski)
Netanyahu under pressure 248.88
(photo credit: Ariel Jerozolimski)
Prime Minister Binyamin Netanyahu on Thursday caved in to pressure from the Histadrut Labor Federation and fierce political opposition to ameliorate the Treasury's budget cut proposal. Netanyahu ordered the Finance Ministry to cancel welfare reductions that would hurt the weak segments of the population, such as cuts to National Insurance Institute payment for the handicapped and Holocaust survivors. The planned budget cuts of NIS 14 billion would take place over two years across two main areas: defense and welfare. The proposal presented to all ministers on Wednesday night encompassed a list of cuts totaling NIS 7b., sparking furious reactions across the political spectrum. Cuts to the welfare budget proposed by the Finance Ministry include reducing child support payments by 10% and freezing National Insurance Institute payments for the handicapped and Holocaust survivors through the end of 2010. Furthermore, patients will be charged NIS 50 for every day they are hospitalized, including for child birth, and unemployment benefits criteria will be tightened and tax benefits for new immigrants will be reduced. The Treasury has clarified that if Histadrut Chairman Ofer Eini agrees to its requests, which include a freeze of public sector wages, the government will not need to make additional cuts, and might be able to scrap some of the cuts now being discussed. Freezing public sector wages would save the state approximately NIS 3.5b. a year. In exchange, Eini is demanding that the government raise the ceiling on the year-on-year increase in public spending from 1.7 percent to 2.5%. Meanwhile, the Histadrut has threatened to destabilize the coalition unless the cuts proposed by the Treasury in welfare, education, and health are removed from the draft state budget for 2009-2010. "If the budget does not undergo changes and the proposed welfare cuts that hurt the weak are not revoked by Tuesday's cabinet meeting, we will take the necessary steps to shake up the coalition," sources close to the Histadrut said. On Thursday night, senior Finance Ministry officials started marathon meetings with the Histadrut and employer organizations in an effort to strike a deal. Earlier in the evening, Eini met with the prime minister's new economic adviser, Uri Yogev, to iron out the differences between the sides. "The government has made a number of commitments, and we are adjusting the budget so that they can be met within constraints of the 2009-2010 budget framework. The proposal is aimed at organizing the economy in a better way and not to hurt certain groups of the population," Ram Belinkov, the Finance Ministry's budget supervisor, said in Tel Aviv. Asked whether political pressures played an important role in the preparation of the budget plan, Belinkov said that without political pressures he would have presented a different plan, but for that to happen the system would have to be changed so that coalition agreements were not be needed when forming a government. "Until the cabinet meets on Tuesday, there is still a lot of time and much can change," Belinkov said.