Subscribe to Print Edition | Thu., November 20, 2008 Cheshvan 22, 5769 | | Israel Time: 03:15 (EST+7)   Back to Homepage web haaretz.com Haaretz Toolbar Diplomacy Defense Jewish World Opinion National Print Edition Car Rental Books Haaretz Magazine Business Real Estate GA 2008 Travel Week's End Anglo File

Compromise to create growth By Haaretz Editorial Tags: Labor, budget, Israel News  Now, once again, everything is repeating itself, exactly as in the coalition negotiations with Kadima chief Tzipi Livni just one month ago. Then as well, in the middle of the international economic crisis, the Labor Party and Shas were demanding tremendous additions to the budget for their own constituencies. This is why the negotiations broke down and led to early elections. The same thing is happening now. Both these parties continue to demand large additions to the budget as a condition for supporting the economic stimulus plan, and thus are jeopardizing the plan's approval. They are trying to exploit the situation to improve their image among the voters. We have to understand that the 2009 budget situation is very bad indeed, even without the new demands. The sharp decline in economic activity is causing tax revenue to plummet, so the deficit, which was supposed to stand at one percent of gross domestic product, is liable to reach five percent - a very dangerous figure. Indeed, only three weeks ago Standard & Poor's lowered Israel's credit rating outlook amid demands to increase the deficit and delays in approving the 2009 budget. Increasing the deficit in a time like this is dangerous and will exacerbate the crisis. Enlarging the deficit will sting Israel's credit ratings, cause interest rates to rise, increase public debt and harm the business sector. It is even liable to spur inflation and an uncontrolled devaluation of the shekel, which would be most devastating to the weak, whom Shas and Labor presume to protect. Advertisement Bank of Israel Governor Stanley Fischer firmly opposes increasing spending in the 2009 budget, so plans for stimulating growth must be responsible and balanced. They must include provisions that encourage growth, but also cuts in the kind of spending that does not encourage growth. We have to direct more money in the budget to infrastructure projects such as roads, railroads, water, sewage and communications. Industry should be helped by increasing research and development outlays and subsidies for wages at factories in the periphery of the country. State guarantees for some loans would also be appropriate to help businesses draw credit from banks. However, it is also necessary to cut the very high additional spending for the Defense Ministry, make the large education budget more efficient, and save at other government ministries. Salaries in the public sector should be frozen (at a time when they are being cut in the business sector) and no transfer payments of any sort should be increased. In addition, every political party should declare that it will make no special demands for its constituencies during the coalition talks that would follow the February elections. Moreover, the plan to decrease taxes should be continued and even accelerated, because lowering taxes is an excellent engine for growth. Knesset members from the Labor Party and Shas must put personal and political considerations aside. This is a time of emergency, so they must not wreck the Finance Ministry's plan. If the country's economy is truly important to them, they must approve the 2009 budget. This will send a message to the public of stability and responsibility, which we currently need so much. Bookmark to del.icio.us   The King is dead Archeologists find new evidence for King Herod's tomb site. Al-Hasbara Israel launches Arabic YouTube channel to bypass Arab media.

Read & React Bradley Burston: Dividing Jerusalem, one wall at a time Responses: 42 Peres: Obama told me he was 'very impressed' with Arab peace plan Responses: 75 VIDEO / Peres speech at Oxford University disrupted by anti-Israel protesters Responses: 104 Settler rabbi: The State of Israel is an enemy of the people Responses: 69 Hamas: We're prepared to end cease-fire and confront Israel Responses: 49 More Headlines 22:25 IAEA: Syria site bombed by Israel bore features of nuclear reactor 22:05 Israel to boycott 'Durban II' anti-racism conference 21:40 Assad: Israel never asked Syria to cut ties with Hezbollah, Iran 21:42 PA negotiator: Obama told Abbas he'd spare no effort to see Mideast peace 19:26 Israel launches Arabic YouTube channel to bypass Arab media 22:02 Jewish Republican representative elected to top deputy spot in Congress 01:36 Archaeologists find new evidence for King Herod's tomb site 23:06 GA special report / Satisfied participants bid farewell to Jerusalem 00:44 U.S. FAA downgrades Israel's aviation safety ranking 19:04 Dividing Jerusalem, one wall at a time 02:09 Al-Qaida No. 2: Obama guilty of betraying Muslim roots in backing Israel 00:42 Peres speech at Oxford University disrupted by anti-Israel protesters 02:07 Warsaw completes restoration project marking Jewish Ghetto boundaries 01:50 Court sentences Boaz Yona to 7 years, doubles damages he must pay 02:40 Report: 90% of schools offer auxiliary programs not monitored by Education Min. Previous Editions Select Day 19 nov 18 nov 17 nov 16 nov 14 nov 13 nov 12 nov 11 nov 10 nov 09 nov 07 nov 06 nov

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