Netanyahu Planning Budget Changes in Wake of Protests

PM believes he has public support to take on big businessmen.

In the wake of nationwide protests over the high cost of living, Prime Minister Benjamin Netanyahu is planning changes to the nation's budget within the next few weeks that would lower the burden on the middle class.

Netanyahu, who discussed the matter over the weekend, is planning to set up a team to draft recommendations on matters such as decreasing import taxes, decreasing excise taxes on gasoline, reducing electricity prices and cutting the state budget.

Netanyahu - Marc Israel Sellem - 31072011
Marc Israel Sellem

Netanyahu reportedly feels the protests indicate public backing for a campaign against economic concentration by tycoons. He is planning to meet with the committee addressing the matter today. Netanyahu reportedly considers economic concentration to be one of the country's biggest economic ills and is determined to fix the problem, Likud sources said over the weekend.

Netanyahu's attitude reportedly changed after a tense week at the Prime Minister's Bureau and the Finance Ministry, where officials felt they were losing control in the face of the growing protests. Netanyahu reportedly failed to understand how serious the issue had become until the middle of the week, when he canceled a scheduled trip to Poland.

Officials at the Prime Minister's Bureau became increasingly agitated over the Finance Ministry's lack of action. Treasury officials had reportedly been planning to sit quietly by in the hopes that protests would subside. Finance Minister Yuval Steinitz reportedly has not met with his advisory panel even once since the cottage cheese protests began, and the Finance Ministry has not been able to find solutions "outside the box," which Netanyahu had demanded.

Netanyahu therefore decided over the weekend to personally handle the social and economic issues raised by protesters. He has started shifting authority from the Finance Ministry to his ministry director general Eyal Gabbai and National Economic Council head Eugene Kandel.

Netanyahu was reportedly disappointed that the plan he proposed last week to address the housing shortage was rejected by the public and the media.

Treasury sources have admitted to the validity of fundamental demands made by the protesters - who include the tent camps campaigning against high housing prices, parents fighting the high cost of raising children, and doctors lobbying for higher salaries.

Ultimately, the government will need to answer the public's demands, Treasury sources say, but currently the government's priorities don't allow for such funding: The defense budget, for example, would need to be cut in order to address all the demands. However, Defense Minister Ehud Barak is currently demanding another NIS 5 billion to NIS 7 billion that he claims Netanyahu promised his ministry.

Sources in the government noted that interest groups had jumped onto the protesters' bandwagon, and that the authorities needed to differentiate between the protesters' justified demands - such as lowering prices - and the demands of interest groups. Histadrut labor federation chairman Ofer Eini has publicly thrown himself behind the protesters, leading government sources to speculate about whether he intends to help them address some of the economy's major distortions, which include the high salaries at state monopolies such as the Israel Electric Corporation and the ports, whose workers are unionized through the Histadrut.

Netanyahu's associates also criticized tycoons who publicly voiced support for the protesters, even though they are personally responsible for price increases.

"The tycoons know that they're responsible for part of the high cost of living, but instead of lowering prices and encouraging competition, they're directing the fire at the government," said an associate.