Subscribe to Print Edition | Sun., July 27, 2008 Tamuz 24, 5768 | | Israel Time: 02:01 (EST+7) web haaretz.com   Back to Homepage Rosner's Domain Diplomacy Defense Jewish World Opinion National Print Edition Car Rental Books Haaretz Magazine Business Real Estate Easy Start Travel Week's End Anglo File

Treasury wins budget battle By Meirav Arlosoroff The battle over the increase in next year's budget has ended - for now - in a victory for the Finance Ministry: Prime Minister Ehud Olmert has agreed that the 2009 budget will increase by only 1.7% compared to 2008. In his decision, Olmert chose the treasury's stance over that of his own National Economic Council, headed by Prof. Manuel Trajtenberg. The council had recommended adopting a new formula for setting the state's spending target, which would lead to a 2.2% rise in government spending next year. Under Trajtenberg's proposal, government spending would rise by 2.2% a year through 2011, while in 2012, the budget would rise by 2.4%. But the treasury insisted that the 2009 budget grow by only 1.7%, due to fear of the effects of the global economic crisis on Israel. Nevertheless, the treasury proposed that the rate of growth in government spending not be fixed at 1.7% annually, but rather increase as Israel's ratio of national debt to gross domestic product falls. The Finance Ministry recommended increasing expenditure by at least 2.5% a year once the debt-to-GDP ratio drops below a predetermined level. Advertisement The disagreement between the Prime Minister's Office and the treasury has turned into an ideological debate in recent months. The main question is how to determine the appropriate growth in government spending. The International Monetary Fund's report of a few months ago recommended that Israel change its policy for determining budgetary priorities. Instead of the current method, which involves setting targets for the increase in government spending, it said, Israel's primary goal should be reducing the national debt-to-GDP ratio. The spending target would then be derived from the debt reduction target. The National Economic Council presented a new formula for setting spending targets based on the IMF's recommendations. The council proposed setting the spending increase in the neighborhood of Israel's annual economic growth. The precise figure would be an average of expected GDP growth in the upcoming fiscal year, estimated growth in the current year and average growth over the previous decade. This figure would then be used to compute the target for reducing the debt-to-GDP ratio. But the treasury objected to the council's proposal. One reason was its claim that a target based on growth averages would create a cyclical system, whereby spending would increase in good years, but decline in bad times. Such a policy would keep spending down in times of recession, rather than increasing spending to stimulate the economy. Instead, the Finance Ministry proposed a formula allowing spending to rise in relation to the decrease in the debt ratio. Today, Israel's debt-to-GDP ratio is around 80%, and the National Economic Council has recommended reducing it to 54% by 2019. But in any case, the treasury objected to implementing the new framework in 2009, due to the global economic crisis. It was more worried about the psychological effect of increased spending than the small increase in actual spending. Specifically, it worried that it would seem as if fiscal discipline had been abandoned. Budget behind schedule Moti Bassok adds: Yet another meeting on the 2009 budget between Olmert, Finance Minister Roni Bar-On and their aides ended with no real results yesterday. Treasury budgets director Ram Belinkov and Ra'anan Dinur, director general of the Prime Minister's Office, will meet next week to attempt to find solutions to two major bones of contention: the cuts in the 2009 budget, and the items to be included in the Economic Arrangements Bill. The treasury claims it is necessary to trim NIS 8.5 billion from the 2009 budget, while the Prime Minister's Office feels the amount needed is much smaller, and it might even be possible to get by without any cuts. Bookmark to del.icio.us   Former top spy speaks Ex-Mossad chief Halevy says a strike on Iran would affect Israel for 100 years. Trying Hitler Did a light sentence in a Munich trial pave the way for Hitler's rise to power?

Read & React Obama to PM: Iran action legitimate only if talks fail Responses: 212 Report: Ex-Mossad chief says strike on Iran could 'affect us for 100 years' Responses: 218 Iran convoy attacked reportedly while taking arms to Hezbollah Responses: 170 Report: PA mulling unilateral declaration of statehood Responses: 185 Shin Bet head Diskin: Truce with Hamas unlikely to hold Responses: 103 More Headlines 00:29 Hamas accuses Mohammed Dahlan's group for carrying out deadly Gaza blast 14:33 Report: Ahmadinejad says Iran now has 6,000 centrifuges 01:05 Security sources: Israeli prisons are training grounds for Hamas terrorists 21:22 5 drown, including 12-year-old boy, in fatal weekend on Israel's beaches 19:23 Did outcome of early Hitler trial alter the course of history? 21:49 Friends, coworkers remember beloved teacher killed in car accident in India Saturday 07:27 Report: Ex-Mossad chief says strike on Iran could 'affect us for 100 years' 12:21 Lebanese factions clash in north for second day, as death toll rises to eight 01:52 Barak: Law enforcement system must be protected from Olmert's assaults 05:24 Report: PA mulling unilateral declaration of statehood 10:56 IDF commander: We must deal with settler 'provocateurs' Previous Editions Select Day 25 jul 24 jul 23 jul 22 jul 21 jul 20 jul 18 jul 17 jul 16 jul 15 jul 14 jul 13 jul

Special Offers Advertisement Fattal Hotel Chain Perfectly located hotels on best resorts of Israel. Israel's Premier Real Estate Website www. israel-property.com Dan Hotels Israel Live the Legend & experience an Unforgettable Summer Vacation Yossi Avrahami Presents: New Luxurious Projects in North Tel Aviv & Eilat Holyland Park Jerusalem Apartment Tower World Class Luxury Your vacation starts here Israel Travel Center Guaranteed Lowest Rates Hebrew Summer courses From $39.95 ISRAEL BONDS Build Israel Israel bonds - a multi-purpose way to celebrate Israel's 60th Eldan Rent a Car Israel's leading car rental company offers you a 20% discount on all online reservations Junkyard Junk a car - get free towing nationwide and a tax-deductible receipt

Home | TV | Print Edition | Diplomacy | Opinion | Arts & Leisure | Sports | Jewish World | Underground | Site rules |

Real Estate in Israel | Travel to Israel with Haaretz | Hotels Israel | Restaurants Israel | Tourist attractions Israel | Shops Israel

birthright Israel | Search engine marketing

Haaretz.com, the online edition of Haaretz Newspaper in Israel, offers real-time breaking news, opinions and analysis from Israel and the Middle East. Haaretz.com provides extensive and in-depth coverage of Israel, the Jewish World and the Middle East, including defense, diplomacy, the Arab-Israeli conflict, the peace process, Israeli politics, Jerusalem affairs, international relations, Iran, Iraq, Syria, Lebanon, the Palestinian Authority, the West Bank and the Gaza Strip, the Israeli business world and Jewish life in Israel and the Diaspora.

© Copyright  Haaretz. All rights reserved