Histadrut Agrees to Partial Wage Freeze

Treasury: Union and IDF coordinating stance.

The Finance Ministry waged a war on several fronts over the weekend: Teams met with Prime Minister Benjamin Netanyahu over budget cuts, the Histadrut labor federation over the 2009-2010 public sector wage freeze, and the defense establishment over the proposed defense budget cuts.

Treasury officials are claiming that Histadrut chairman Ofer Eini and Israel Defense Forces Chief of Staff Gabi Ashkenazi coordinated their positions toward the Finance Ministry.

The cabinet will vote today on many structural changes and reforms that were removed from the Economic Arrangements Bill, supplementary legislation accompanying the budget, because they do not relate directly to the 2009-2010 state budget.

These include reforms affecting the Israel Lands Administration, the mobile phone market and the water economy, as well as proposals to reduce the number of foreign workers, to increase gas prices, to impose VAT on fresh produce and to end immigration from Ethiopia. Many of the treasury's proposals are expected to face strong opposition.

On Thursday, Eini agreed in principle to a freeze on public sector salaries through the end of 2010.

A total freeze on the wages of government workers would save the state approximately NIS 7 billion over those two years, or about half the NIS 14 billion deficit for that period.

As of press time last night, Eini had agreed to a partial salary freeze that would save the treasury between NIS 1.7 billion and NIS 2.5 billion each year.

A total wage freeze would affect professions that only recently achieved salary increases after years of negotiations, such as physicians and teachers.

It would also affect the pensions of retired state employees and the wages of government employees at the low end of the pay scale, including those who receive an income supplement allowance.

In exchange for the salary freeze, the treasury will agree to increase the total budget. The cabinet recently approved a 1.7% increase over the 2008 budget, but the expectation now is that this will become 2.7%, or about NIS 2.5 billion more than the 2008 budget.

The defense establishment is bitterly opposed to the treasury's proposal to cut NIS 3 billion from its budget each year. The assumption is that Netanyahu will have to intervene personally, and that even then the cuts will be much lower than the Finance Ministry wants.

Shas, a member of the coalition, is adamantly opposed to reducing child allowances. The treasury wants to lower them by at least 10%.

Netanyahu is to meet today with Deputy Health Minister Yakov Litzman (United Torah Judaism) and officials from the finance and health ministries over the treasury's proposal to impose a NIS 50 per diem co-pay for all hospital stays, including childbirth.

On Friday, Litzman met with Finance Minister Yuval Steinitz, who promised him that the basket of subsidized medicines would not be affected.