PM forced to postpone vote on Trajtenberg report

Cabinet ends marathon session without resolution as three Likud rebels join coalition members in opposing recommendations.

PM Netanyahu with Prof. Manuel Trajtenberg 311 (R) (photo credit: Marc Israel Sellem)
PM Netanyahu with Prof. Manuel Trajtenberg 311 (R)
(photo credit: Marc Israel Sellem)
Prime Minister Binyamin Netanyahu postponed an anticipated cabinet vote on the Trajtenberg Report on socioeconomic change to next week after failing to gain the backing of a majority of government ministers on Monday.
The cabinet ended a marathon sitting without resolution as Welfare and Social Services Minister Moshe Kahlon and his Likud colleagues Silvan Shalom and Yossi Peled joined Israel Beiteinu, Shas and Atzmaut ministers in opposing the report.
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Netanyahu tried lobbying ministers for nine hours before deciding at around 7 p.m. to postpone the vote. Shas leader Eli Yishai told him, “Our opposition is a matter of principle. The weakest sectors have been forgotten on the side of the road. There is no public housing in the proposal. We will continue to oppose this report until its flaws are fixed.”
He also told Netanyahu, “You can’t buy me,” in response to Netanyahu’s offer to make changes to the report to make it more acceptable to Shas.
The leaders of the protest movement also welcomed the postponement of the vote.
“We are satisfied by the postponement of the vote today on the committee’s report. The public will sit quiet when the prime minister attempts to pass a vote quickly, in a closed meeting as it happened today,” they said in a statement. “The solution to the problems of Israeli society is not in giving this or that pacifying candy but in deeply changing the order of priorities and this can only be achieved by a new social budget for 2012.”
Daphni Leef, whose Facebook call started the social justice movement, said “More than a million Israelis did not go out to the streets last summer only so a report will be snuck behind our backs.”
Vice Premier Silvan Shalom questioned Netanyahu’s insistence on pushing through the report, telling him at a meeting of Likud ministers prior to the cabinet meeting that doing so was bad for the party, according to a source in Shalom’s office.
Shalom told Netanyahu that even if the vote passes the cabinet it would still be defeated in the Knesset, which could lead to early elections. Netanyahu responded by telling Shalom not to count on such scenarios, the source said.
The Prime Minister’s Office said in a statement late Monday that Netanyahu was convinced he would eventually obtain a majority. This was echoed by Finance Minister Yuval Steinitz, who told Channel 2 News: “We have been in similar situations to this before – not once, not twice, and not even five or 10 times – and in the end a majority has always been obtained.”
Steinitz added that it was important the government accept the entire report, making only small amendments where necessary.
A spokesman for Kadima said the government had “voted no-confidence in Netanyahu.”
“Netanyahu’s failure proves that he is disconnected and focused entirely on his own political survival and not on the welfare of the citizens of Israel,” he said.
Kadima accused Netanyahu of “holding the Israeli economy hostage” in a “cynical” ploy to fight his own political battles, and called on the prime minister to present a new budget with redefined priorities for 2012 or, failing that, to call an election.
Prof. Manuel Trajtenberg and his four team leaders all made presentations to the cabinet on Monday afternoon, followed by comments from Bank of Israel Governor Stanley Fischer, a source in the Prime Minister’s Office said.
Fischer called the report “impressive” and “very important,” according to the source, praising it for its focus on earlychildhood education and for maintaining the budgetary framework. He told the cabinet the global economy will soon enter a recession and the Israeli economy would suffer from over-expenditure, and praised Trajtenberg for understanding that.
The Manufacturers’ Association and the Histadrut labor federation both hit out at the Trajtenberg Report before the cabinet meeting, with the former singling out clauses on national insurance payments and import taxes it said would endanger competition, and even cause prices to increase.
A clause raising the employers’ share in national insurance payments would cost Israeli businesses NIS 2.5 billion a year, Manufacturers Association Chairman Shraga Brosh wrote in a letter to government ministers.
“This recommendation was delivered in contrast to the committee’s mandate. It will make it more expensive to employ workers, will damage employment incentives and will even lead to an increase in the prices of goods and services,” Brosh wrote.
“The claim that employer national insurance payments are lower than in the rest of the world ignores the fact that the reason for this is that employers pay more to pension funds [than in the rest of the world].”
Brosh also took to task a clause canceling all import tariffs within 12 months, saying it would translate to “the immediate relinquishment of NIS 2.7 billion in state revenues and the disintegration of measures that protect Israeli industry against strong countries with which Israel does not have trade agreements.”
Histadrut Chairman Ofer Eini blasted the report for “realizing the dreams of the Treasury’s budgets department.”
In his first detailed response since Trajtenberg released the recommendations last Monday, Eini said: “The Trajtenberg Report gives legitimacy to the ongoing privatization of construction and other industries that take advantage of workers, to state avoidance from providing social services and to unbridled competition without taking into account the consequences.
“People took to the streets against the extreme capitalist outlook of the budget department’s house of study. But what they got from the government in response was the budgets department in all its splendor, wrapped in the image of the Trajtenberg Report.”
The Histadrut chief slammed the report’s handling of price supervision, criticizing the committee for recommending the removal of import tariffs and for manufacturing competition instead of setting price controls.
“The protest was directed against beastly capitalism, but instead what we received was cannibalistic capitalism. Unbridled competition will mean everyone eats each other and in the end those who pay the greatest cost will be the workers,” Eini said.
“We are in favor of competition, but the Trajtenberg report offers us competition according to the budget department’s wording, which sees ‘price culture’ as the most important thing and does not care who ultimately pays the cost.”
The Federation of Israeli Chambers of Commerce executive issued a statement welcoming part of the Trajtenberg report, but also expressed reservations over possible damage to the business sector.
The seven members of the executive team said the Trajtenberg report is positive when taken as a whole, praising in particular the removal of import taxes, which they said “will lead to a decrease in the cost of living and will contribute especially to a reduction in the price of food and commodities.”
However, they expressed concern over raising the employers’ share in national insurance payments, and also criticized sections on increasing company and capital gains taxes.