Finance Minister Yuval Steinitz
Finance Minister Yuval Steinitz Photo by Moti Milrod
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The worldwide economic crisis, which is centered in Europe, is now drawing closer to Israel's gates. The forecasts on growth in the year 2012, which until recently stood at about 4 percent, now stand at about 3 percent and going in the direction of continued decline. This week, the OECD published a forecast that the growth rate in Israel in the coming year will be only 2.9 percent. It is worth recalling that when the global crisis broke out in 2008, growth was affected in 2009 and dropped to a mere 0.8 percent while the deficit rose to the dangerous level of 5.2 percent. This is likely to happen now as well, in an even more severe form, since the crisis is Europe is worse and could have an effect on Israel, leading to zero growth and a deficit that would break the negative record of 2009.

A large deficit is dangerous because it brings about an increase in the public debt, and then the concrete danger of lowering the credit rating, raising interest rates, a drop in investments, dismissals of workers and a deepening of the slowdown. That is precisely what happened to the European countries, which for years conducted an irresponsible fiscal policy of growing expenditure and deficits, while trying to win public favor with populist measures. The upshot is a deep crisis, high unemployment, and severe cuts in Greece, Italy, Spain, Ireland and Portugal.

Israel must not be allowed to reach such a humiliating state. Therefore, the Finance Ministry deserves support for the fiscal plan to make the cutbacks that it is formulating, aimed at offsetting the irregularities created in the 2012 budget, which stem from generous government decisions and privately sponsored legislation in the Knesset.

The cutbacks will naturally encounter a large number of objections as there are always those who will be harmed by them, and no politician wants to see a bill he promoted become frozen. But there is no choice. It is also important to carry through on cuts in the defense budget so it will be possible to pay for the recommendations of the Trajtenberg Committee. It will not be possible to set up centers for guidance and employment for the ultra-Orthodox - as the committee recommended as a means to encourage them to go out and work - nor will it be possible to introduce free education from the age of three in order to help young couples, without the funding that will come from the cuts in the defense budget.

Therefore, the government and the Knesset must be called on to show responsibility and do the right things - even if this is not a popular step in the short run.

Read this article in Hebrew: דרושה אחריות תקציבית