Prime Minister Benjamin Netanyahu and his advisers met with Finance Minister Yuval Steinitz last night to stave off a Histadrut-backed general strike by formulating a package of benefits and tax cuts.
The package is also intended to mollify Likud backbenchers who are protesting recent tax hikes.
Netanyahu and Steinitz will meet today with Histadrut Labor Federation Chairman Ofer Eini, chairman of the Federation of Israeli Economic Organizations Shraga Brosh and chairman of the Israel Union of Local Authorities Shlomo Buhbut to discuss the plan.
The steps, which Netanyahu and Steinitz plan to present by the end of the week, are fairly modest and unlikely to satisfy the public, Eini, Brosh, Buhbut or the recalcitrant backbenchers.
Last night's meeting followed another meeting the previous night in the prime minister's living room between Steinitz's and Netanyahu's teams. It will probably take at least one more meeting - set for today - to come out with a plan tomorrow.
It is already clear that the prime minister and finance minister will make concessions to Eini and Brosh, although it is unclear to what extent.
The treasury is reportedly angry with Eini because following the solution to crisis in the local authorities, and the increase of public-sector wages by 6.5 percent, it was thought the Histadrut head would keep things quiet at least in 2011. Sources in the treasury claim Eini decided to make noise after he lost his hold on the cabinet following Defense Minister Ehud Barak's departure from the Labor party last month.
Netanyahu is pushing for a compromise, and has raised the possibility from time to time of reducing tax revenue this year.
The treasury will offer to upgrade public transportation on particularly crowded routes and give a 20-percent discount to passengers who purchase combined tickets for inter- and intra-urban bus travel. It is also expected to propose increasing the number of people eligible for negative income tax by tens of thousands by canceling certain criteria.
The issue of raising minimum wage has also been discussed, but opinions over this are divided.
The Prime Minister's Bureau yesterday denied a report on Army Radio that Netanyahu had told his associates he was sorry he had appointed Steinitz as finance minister.
Transportation Minister Yisrael Katz yesterday called the recent hikes of gas prices "unreasonable and not right" at a meeting of some 200 Likud social activists in Ariel.
MK Danny Danon, also of Likud, said yesterday that he would be collecting the necessary signatures to require a Likud Central Committee meeting over the matter. He described the rises in the price of gas taxes, water and bread as an "economic knockout" to the public.
Last December, the treasury reportedly had billions of shekels in its coffers that can be used to finance the expected package. However, after it does so, it will likely demand an across-the-board cut of the budgets of all ministries to finance the package.
Interior Minister Eli Yishai has already offered his ministry to undertake such a cut in order to cancel new taxes on fuel, water and bread.
Bank of Israel Governor Stanley Fischer yesterday told the Herzliya Conference: "We have no money to waste. Finance Minister Steinitz is doing the right thing by insisting on preserving the budgetary framework. The [politicians] must understand that we are living in a period of uncertainty."
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