PM Cuts Budget to Stave Off Strike

Announces rise in minimum wage, cancels planned tax on gasoline.

Prime Minister Benjamin Netanyahu and Finance Minister Yuval Steinitz convened a news conference in Tel Aviv yesterday during which they announced a series of economic measures aimed at easing the financial hardships of a public that has seen a dramatic rise in the cost of living.

Netanyahu and Steinitz announced that the state would repeal its planned tax on gasoline (NIS 0.23 per liter ) and that it would raise the minimum wage from NIS 3,850 to NIS 4,300.

netanyahu - Alon Ron - February 11 2011
Alon Ron

These measures will cost NIS 3 billion, which the state will slash from the budgets of other government ministries with the exception of the Defense Ministry. Netanyahu and Steinitz said the cuts will encompass two percent of every ministry budget.

During the news conference, Netanyahu said the state was forced to impose higher taxes on the public in recent weeks due to rising prices worldwide.

"The world is now emerging from a serious financial crisis," Netanyahu said. "Israel withstood the crisis with relative ease. Nonetheless, the price of gasoline, foodstuffs, and other basic necessities is rising worldwide, including in Israel. The economies that are recovering from the collapse of 2008 consume a great deal of gasoline and cause a surge in the price."

"The world is also witness to the economic and political earthquake that has gripped the area between Morocco and Pakistan," Netanyahu said. "Israel has no control over the global price of raw materials. Even superpowers like the United States, China, and Japan have no control over the price of gasoline."

The premier repeatedly noted that despite the financial difficulties, the state did not break the budget.

"As prime minister, finance minister, and prime minister a second time, I have been involved with 11 budgets, and I have always been careful not to exceed the budget framework," the premier said. "Citizens of Israel feel that there is an experienced, responsible hand on the wheel."

Netanyahu said that the economic findings for 2010 were encouraging for Israel, whose unemployment rate dipped to 6.6 percent (as opposed to 9.6 percent in the U.S. and 10 percent in the European Union ) and whose economy added 100,000 new jobs.

According to the premier, the government has undertaken a number of important socio-economic steps within the 2011 budget - like increasing child stipends by NIS 500 million, increasing state subsidies for daycare centers by NIS 320 million, free dental care for children under the age of 12 at a cost of NIS 130 million, and the enactment of a negative income tax at a cost of NIS 700 million.

"The steps that we formulated were designed to help those who do not have the means rather than those who do have the means," Netanyahu said. "Here we have an appropriate, responsible series of measures that provides socio-economic solutions in a level-headed manner without going beyond the bounds of the budget framework."

Netanyahu listed a number of other steps included in the state's benefits package, including an average 10 percent drop in the cost of traveling by public transportation (bus and train ) across the country. The measure, which will cost the state NIS 300 million, aims to ease the economic burden on the lower- and middle-classes.

In addition, the state will institute a 10 percent cut in the price of water for private household usage. Those who consume large amounts of water for private swimming pools or gardens will have to cover much of the difference. Disabled individuals will receive an enlarged water quota at a steeply discounted price.

The minimum wage will be increased by NIS 450, but this applies only for those who do not enjoy benefits, including car maintenance payments, overtime, clothing, and others, that put their net salary above the minimum.

Netanyahu and Steinitz did not indicate the cost that the state would have to incur to subsidize the increase in the minimum wage.

The repeal of the tax on gasoline - which equaled NIS .23 per liter - will cost the state NIS 760 million, it was announced yesterday. This estimate runs counter to treasury officials' statements in recent weeks that a repeal of the tax would set the state back NIS 2 billion.