Lapid: Israel Has Monster Overdraft, I'll Have to Become 'Mr. No'

Yair Lapid starts his stint as finance minister by admitting that things are likely to get worse before they get better.

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Finance Minister Yair Lapid started his first week of work by telling activists from his Yesh Atid party that Israel’s fiscal situation is far worse than he had imagined, and warned that he would have to undertake painful measures to correct it.

"The picture that is slowly unfolding before me is a lot worse than I had expected,” Lapid wrote in an email over the weekend. “Don’t use words like ‘deficit’ or 'fiscal crisis.’ I’m telling you that it’s simply a lot worse. I wanted to fix the house but discovered that our bank account is in overdraft. What kind of overdraft? Monstrous, ominous and growing.”

Lapid has until the end of July to get a budget package through the Knesset.

The Bank of Israel has warned that the fiscal deficit could balloon to 4.9% of gross domestic product if government spending is not massively reduced - while meanwhile, taxes are raised and tax breaks abolished.

This year alone, the government needs to reduce its planned spending by NIS 13 billion just to keep spending growth in line with government-mandated ceilings, according to the Bank of Israel.

Lapid will devote his first year as finance minister to reducing the so-called “overdraft,” he vowed, even if he'd have preferred to address other, “happier” issues. “I believe that my job is to go exactly where it is most difficult,” he said.

He accused Prime Minister Benjamin Netanyahu's previous government of making irresponsible fiscal choices that led to the current situation.

“How did it happen? Like any overdraft," he said. "By wasting a lot of money that didn’t exist, counting on money that didn’t materialize, taking on obligations that it turned out should not have been made. For several years, they tried to sell [Israel’s citizens] on the idea that their situation was good. They answered, 'It’s not true; it just can’t be.'”

“The problem," Lapid added, "was created because instead of managing the economy responsibly, they took huge loans and threw a party. I’m not going to repeat that mistake."

“The time has come to deal with the overdraft and that’s what I’m going to do. … We will work hard, we’ll reduce, we’ll cut expenses, we’ll cut even where it’s hard,” Lapid declared. "But there’s also a benefit: If we do it now, it won’t take long.”

Lapid said he hoped people who feel their economic situation growing worse over the next year will understand that the deterioration is only temporary, and that taking strong action now will enable him to turn to fundamental economic problems the following year. Among those, he said, are lowering home prices – a topic he addressed twice for emphasis – education, social welfare and helping small businesses.

In his first meeting with treasury officials Lapid insisted vision should take precedence over policy, he wrote. "My vision is an economy whose center is the working man, what we call the middle class,” wrote Lapid. ”The most important thing is to create an economy in which, if a person is working, then the economy will work for him.”

Lapid praised the treasury staff in the email, though in the past he appeared to share the public's criticism of them.

“Why do we need to vilify them? Because their job is to tell politicians 'no’ all the time," he said. "I’ll have to get used to this because I’m about to become the top ‘no’ man.”

Finance Minister Yair Lapid.Credit: Tomer Appelbaum

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