Treasury officials expressed optimism that despite complaints about spending cuts, the cabinet would approve its 2019 draft budget Thursday - if only to guarantee that cabinet members can make their flights to Eilat for Likuds annual Likudiada.
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Meanwhile, Finance Minister Moshe Kahlon ensured the Histadrut was on board by reaching agreement Wednesday with Avi Nissenkorn, the labor federations chief, on civil service wage hikes, raising public sector productivity and cutting the work week.
The work week cut will be just one hour to an official 42, but Kahlon said it would help Israelis maintain a better work-life balance.
Israels labor market is characterized by low productivity and excessive labor, he said. The understandings weve reached to reduce the work week enable workers to better balance work and family and increase productivity and labor conditions for the weakest.
The two also agreed to increase the size of the last increment to a civil service wage hike in exchange for putting off the increase until next year. In addition, they agreed on a mechanism to introduce technology to the public sector to boost its notoriously low productivity.
A day before the cabinet was due to debate the 479 billion shekel ($139.8 billion) budget, ministers sniped at the parts affecting them Tourism Minister Yariv Levin opposed a 10-million-shekel cut to his budget. We need every shekel to continue marketing Israel to the world. Each tourist spends $1,500, he said.
But apart from the urge to wind up Thursdays meeting to leave for the Likudiada, Prime Minister Benjamin Netanyahus government has good reason to advance the budget without delay.
Cabinet members in Likud and in Kahlons Kulanu party want to ensure coalition stability by completing the traditionally tumultuous budget process before an anticipated rough period after police make their recommendations in connection with the various criminal probes involving Netanyahu and associates.
Bank of Israel Governor Karnit Flug, however, said at a news conference Wednesday that she would oppose raising the budget deficit to 2.9% of gross domestic product, from the original target of 2.5%.
In an economy that is at the peak of the business cycle its wrong to raise the deficit target beyond what will keep the debt-to-GDP ratio stable — 2.5%. We should stick to it, Flug said.
She also expressed concern that spending growth would exceed by about 3.4 billion shekels in 2019 the formula using for capping. She attributed the governments persistent problem in keeping to the ceiling to its inability to agree on levels of social spending.
Israel spends too little, compared with other developed economies, but the problem should be addressed systematically, Flug said.