Steinitz: Predictions of Rally in U.S., Europe Have Evaporated

Finance Minister Yuval Steinitz says 'We see that the storm around us is intensifying. We have not reached safe harbor, quite the contrary.'

The times are fraught with uncertainty and looking ahead to 2012, Finance Minister Yuval Steinitz professed himself worried. Speaking to the Knesset Finance Committee yesterday, the finance minister warned of worrying indicators in the global economy, which will inevitably impact Israel too.

"We see that the storm around us is intensifying. We have not reached safe harbor, quite the contrary," the minister said.

Yuval Steinitz - Tomer Appelbaum
Tomer Appelbaum

The state's income from taxes has been dwindling, which will affect its deficit spending targets this year and next year too, Steinitz said. "The drop isn't dramatic at this stage," he said, "but it is cause for concern," because tax revenues have been falling short of expectations for a few months now.

"Looking ahead at 2012, we have to remember that the mission of rescuing the economy from crisis still lies ahead. If we do not manage to preserve our main achievements and to keep the economy healthy, featuring growth and employment, then any social achievement we make will be transient," Steinitz warned.

He estimated that tax collection will run NIS 1.5 billion short of target this year. When the budget for this year was planned, the assumption had been that tax income would be NIS 213.5 billion in 2011, but recently the Finance Ministry lowered its formal tax income estimate for 2011 to NIS 212.5 billion. Now Steinitz estimates the figure for the year will be closer to NIS 211 billion.

If anything the global crisis has been intensifying, Steinitz said. At the start of the year, the crisis seemed to be winding down. "But in the last half year, the forecasts of recovery in the U.S. and Europe disappeared."

Both the U.S. and Europe are wrestling with mammoth debt and the question of how to handle it, he said: "In western Europe, we are seeing economic collapse."

Even if the European Union manages to rescue the euro, the price will be heavy, Steinitz said.

Israel should achieve economic growth of about 4.8% this year, the finance minister said, an especially impressive achievement given the low rates of growth elsewhere in the developed world. "High growth means low unemployment," he said.

Also, Israel has managed to maintain investment in the economy, which can't be said for the U.S., Britain, Germany or France, Steinitz averred.