Finally, Treasury Officials Kick Off 2013 Budget Talks

They start 2 months behind schedule.

Senior staff at the Finance Ministry finally began debating the outlines of next year's budget in the last two days, following a delay of some two months.

The discussions, which have also dealt with the economic arrangements bill that supplements the budget, took place amid uncertainty over whether Prime Minister Benjamin Netanyahu intends to get the 2013 budget approved by the cabinet and Knesset by the end of the year.

Finance Minister Yuval Steinitz was joined at the meetings at his ministry by budget division head Gal Hershkovitz as well as Herskovitz's six deputy division heads.

In addition to next year's budget, the team discussed the state of the current year's budget. Steinitz has been taking the position that as long as Netanyahu has not decided on the timing of the passage of next year's budget, the Finance Ministry staff should conduct business as usual in preparing it, despite the delays up to now.

Nonetheless, it is not clear to officials in Steinitz's office, or more generally in the Finance Ministry, when the cabinet might take up the budget for next year.

At this week's ministry meetings, Hershkovitz presented the treasury's priorities for the coming year's budget: enhancing economic growth; increasing participation in the job market; reducing unemployment; and reducing economic inequality. These priorities require investment in education and road and rail infrastructure, ministry officials pointed out.

Netanyahu would like to include defense among the budget priorities for next year, which could affect budget planning for all the ministries. Required to cut NIS 14 billion from next year's budget, treasury officials have questioned where additional defense funding would come from.

Manuel Trajtenberg, who headed last year's committee to respond to the demands of the social justice protests, said Monday that Israel cannot allow itself to spend more than NIS 60 billion on defense as defense officials are demanding. The country, he said, "can no longer ignore pressing social needs."

"We also cannot endanger the fiscal resilience that was built with such hard work since 1985," he said, voicing opposition to recommendations for billions in defense spending increases made this week by a committee headed by Tel Aviv University Prof. Asher Tishler.

The Finance Ministry discussions are taking place as improvements are being demanded in Israel's debt-to-GDP ratio.

At Monday's session the expectation was expressed that the structural changes planned for next year in the labor market would increase productivity and competitiveness, and in the process encourage economic growth.

The team discussed structural reforms including some that were considered and rejected in the past such as shortening the period of mandatory military service. Also discussed at this week's meetings was how the recent decline in the amount of state land sold for residential construction through the Housing and Construction Ministry would put pressure on the housing market next year and beyond.

The amount of land owned by the Israel Lands Administration that has been made available through the Housing Ministry has declined for a number of reasons, including stalled reforms at the land agency, legislative problems and political disputes.

Also discussed by treasury officials was how the recently released recommendations of the committee headed by Sharon Kedmi, director-general of the Industry, Trade and Labor Ministry, on reducing food prices would affect the economy and individual households.

The officials noted that preparation of the coming year's budget is also taking place amid economic uncertainty around the world, particularly in Europe. (See story below for related coverage).