Cabinet Okays NIS 14b Budget Cut

Decision approved by a vote of 20-10, with all Labor and Shas ministers opposed.

The cabinet decided on Sunday to cut NIS 14 billion in planned expenditures over the next two years. The decision was approved by a vote of 20-10, with all the Labor and Shas ministers opposed.

The 10th vote against came from Education Minister Gideon Sa'ar (Likud).

According to the decision, which approved the overall budgetary framework for this year and next, the 2009 budget will total NIS 313.3 billion and the 2010 budget will be NIS 318.4 billion. This year's deficit will be NIS 44.8 billion, or 6.0 percent of gross domestic product, and government expenditures will be 1.7 percent higher than they were last year.

However, if all the spending currently mandated by legislation and coalition deals were actually carried out, the increase would have to be much more than 1.7 percent. Therefore, in order to keep the increase to this level, a NIS 14 billion cut in planned expenditure is needed.

Labor and Shas, as well as the Histadrut labor federation, want a much higher deficit and spending increase, and Prime Minister Benjamin Netanyahu told the cabinet he would be willing to scrap Sunday's decision and approve one - but only if the Histadrut agrees to freeze public-sector wages and implement reforms in public agencies such as the Israel Electric Corporation and the ports. Without such measures, a senior official in the Prime Minister's Office said, any further increase in spending or the deficit was liable to hurt Israel's credit rating and therefore the economy as a whole.

The Finance Ministry is currently holding intensive talks with the Histadrut and the Manufacturers Association on this subject.

Labor Party Chairman and Defense Minister Ehud Barak, a leading proponent of higher spending, argued during the meeting that "a seriously injured man must be given a blood transfusion immediately in order to stabilize his condition. Only after that do you think about further treatment."

Finance Minister Yuval Steinitz responded using the same metaphor. "During such an operation, you must also take care not to sever a main artery and cause the patient's death," he said. "Our crisis is no less severe than that of Europe or the U.S., but there is no feeling of emergency here that would cause everyone to mobilize and do something."

In particular, Barak wants NIS 3.5 billion more in defense spending than the treasury has allocated.

Bank of Israel Governor Stanley Fischer sided with Netanyahu and Steinitz, saying all the experts oppose raising the deficit and increasing spending. That outraged Sa'ar, who said "there are professionals who think otherwise. Why aren't they being brought here?"