Uri Yogev, top economic adviser to Prime Minister Benjamin Netanyahu, is unmoved by the arrows he's been taking from treasury officials over the "package deal" he cobbled together with labor leaders and corporate Israel. "We met our strategic goals," Yogev said yesterday, adding that one of those was tax cuts.
Nor does Yogev buy the argument that the deal is bad for the economy because of a broad consensus he achieved to reform the ports and electricity economy, for instance.
"The prime minister made two main strategic decisions: that direct taxes would be reduced, and that economic change had to be led along with employers and labor. These were complex decisions, but they enabled us to achieve a broad economic consensus," Yogev told TheMarker.
The goal was complex, the negotiations were complicated but the outcome was a "reasonable, responsible" one, Yogev said.
He ascribes the bitter criticism at the Finance Ministry, which culminated yesterday in the resignation of budget director Ram Belinkov, to "differences in worldview."
"There was a fundamental clash of concepts, how to manage the economic crisis," Yogev said. One of the clashes was over direct tax and the second was about the "package deal."
"I really think that under the circumstances, significant economic steps couldn't have been taken unilaterally," Yogev added.
The outcome is that an accord was achieved without resorting to "all sorts of terrible things," despite the leaks, Yogev said. "We gave the Histadrut various concessions regarding labor relations, but they aren't concessions that ideologically contradict our concepts and economic management. We also gave a great deal to employers, and gave happily."
It's true that the cabinet agreed to increase VAT, which is considered a regressive tax. But Yogev argues that the budget that passed yesterday gives the government more room to spend on social issues.
He freely admits that "he'd be happier" if the deficit could have been kept to 1.7% of gross domestic product, instead of growing to 2.95%. But the agreement with the Histadrut labor federation on freezing public-sector wages will be less broad than originally planned, Yogev explained.
The agreement with the Histadrut includes abolishing convalescence payments in the public sector for two years, which should save the state about NIS 2 billion in that time. Originally the treasury had planned to save itself NIS 4 billion. That could have been achieved if the Histadrut had agreed to freeze the 5% wage hike that was decided on a year ago. However, the Histadrut didn't bite, says Yogev, because freezing the wage hike would have been complicated legally.
"Canceling an agreed-on wage increase is a wage cut, not a freeze," he said.
In exchange, the state received the acquiescence of the Histadrut and employers to restructure the electricity economy, the ports and the Israel Lands Administration. "That's a lot more important than the question of whether the package deal brings us NIS 2.5 billion or NIS 5 billion," Yogev said.
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