Despite having moved to Israel just seven years ago, Bank of Israel Governor Stanley Fischer is well-versed in the workings of Israeli politics. Thus when Fischer speaks out - which he always does carefully, moderately and with considered judgment - every word he says carries great weight. That was also the case on Wednesday, when he spoke publicly for the first time about the enormous problem of the 2013 budget, which exceeds the permitted ceiling by NIS 12-15 billion.
Fischer's historical analysis left no room for doubt about who is responsible for the budgetary situation. He noted that Israel's budget deficit today is higher than the deficit it ran in 2003, a year of severe economic crisis, even though today we enjoy a growing economy and full employment. In other words, which Fischer was obviously careful not to utter explicitly, the Netanyahu government's consistently irresponsible fiscal policy is what caused the problem.
But the central bank governor, who was also careful to praise the government for having the courage to raise taxes on the eve of an election, wasn't interested in pointing fingers. What concerned him was finding solutions - first and foremost, the need to lower Israel's huge and dangerous deficit by making enormous cuts in the 2013 budget and raising taxes.
Because he is an expert in the workings of Israeli politics, his speech dealt with the possible, not just the desirable. He predicted that the next government would have trouble slashing the full NIS 12-15 billion from the budget. If so, he said, there will be no choice but to compensate for the shortfall in cuts by a very steep increase in taxes. The main thing is to keep the deficit from growing, so that Israel won't enter an economic tailspin.
Fischer dwells among his people, and therefore, he is willing to offer solutions to the government even when political constraints don't allow for optimal solutions. Nevertheless, he didn't hide his opinion as to what the right solution is: cutting the entirety of the excess spending from the budget. Otherwise, the price Israel will be forced to pay in the form of tax increases will be very high.
Fischer's remarks must be kept in mind by whoever is elected prime minister in another month.
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