Dei'ah veDibur - Information & Insight

A Window into the Chareidi World

20 Ellul 5763 - September 17, 2003 | Mordecai Plaut, director Published Weekly









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Shema Yisrael Torah Network
Shema Yisrael Torah Network











Government Approves Tough 2004 Budget
by M Plaut and Yated Ne'eman Staff

After a marathon Cabinet meeting that lasted from 8 am Monday morning until the early hours of Tuesday, the government approved the 2004 state budget, including an additional NIS 1.1 billion in unplanned social cuts that was needed because of the decision not to take so much out of the security budget.

Fourteen ministers voted for the new budget and nine ministers voted against it. Those against the budget were the five Shinui ministers, as well as Defense Minister Shaul Mofaz, Education Minister Limor Livnat, Health Minister Dan Naveh, and Industry and Trade Minister Ehud Olmert. Aside from the Shinui ministers, all the dissenters were from Likud.

The additional cut will include an across-the-board five percent slashing of all National Insurance stipends, affecting a wide range of programs. The only stipends exempt from the cut are those of guaranteed minimal income, alimony, elderly stipends, stipends for the severely handicapped and stipends for holocaust survivors. The cut in the stipends is part of a general across-the-board cut of five percent in all government ministries.

The additional cut was needed in order to maintain the Finance Ministry's demand to reduce the budget by a total of NIS 10 billion.

Prime Minister Ariel Sharon told the ministers that the additional cut was needed because of his decision to reduce the planned cut of the defense budget by NIS 2 billion. Sharon decided the defense budget, excluding US aid and other additions, would be NIS 32.75b. instead of the NIS 30.6b that the Finance Ministry had budgeted.

Shinui ministers voted against the budget after claiming that Sharon did not fulfill his promise to cancel budgets for the religious councils because of pressure from the National Religious Party. Sharon said that according to the coalition agreements there was no need to dismantle the religious councils at the moment.

At one point Shinui considered fomenting a major coalition crisis over their demands, but they backed down. Observers said that they probably only voted against the budget because they knew it would pass anyway. This is probably true of the Likud ministers who voted against it as well.

At least eight ministers, including Mofaz, Ehud Olmert, Livnat, Tzachi Hanegbi, Benny Elon, Zevulun Orlev and Effi Eitam also threatened to vote against the budget at one point. Olmert and Livnat had asked Sharon to delay the vote on the budget for two weeks as they had not had enough time to fully examine the 180 page document. Sharon insisted that the vote be held on Monday as planned, saying that any delay would have a detrimental effect on the markets.

Sharon told the cabinet at the start of the Monday morning meeting that the government expects the Bank of Israel to join it in helping the economy grow next year. It was clear that he meant that the Bank should reduce the interest rate.

Bank of Israel Governor David Klein, who attended the first half of the meeting, said he doubts the ability of the government to stay within the boundaries of a 4 percent budget deficit. He said the Treasury's growth forecast is too optimistic, and should be 1 percent, not 2.5 percent.

Sharon said that the government must severely cut its expenses to make the deficit as low as possible, thereby preserving economic stability. Rating agencies were watching government actions and, though they have not reduced Israel's international credit rating recently, they said they would do so if the government does not act responsibly.

Treasury director Ohad Marani said on Monday that cutting the budget was the government's only option. "The problem is that we have a government budget that's too large, a defense budget that's too large."

He said taxes were already too high and that the deficit cannot keep increasing indefinitely. Leaving the deficit unchecked would endanger the American loan guarantees and sink the economy, leaving budget cuts as the only solution.

Marani said he cannot promise that the budget cuts will lead to economic growth, but he said the new budget is the best path to growth.

In a meeting Sunday morning with Netanyahu and Mofaz, the prime minister told the treasury he would agree to a cutback of no more than NIS 750 million in the defense budget. Netanyahu told Sharon that the plan requires a NIS 3 billion cut in the defense outlay and that he was not sure where they could find the additional NIS 2.25 billion to cut any more. Military sources were warning that even the defense cuts accepted by Sharon are "nearly catastrophic."

The Histadrut threatened to launch a nationwide strike. The Histadrut is opposed to the public sector job cuts, and the proposal create competition among Israel's three ports. The Histadrut also decided it would try to block the planned cuts in the court.

Earlier this year the Histadrut struck and then agreed as part of a compromise not to launch any strike action for two years. However it claims that job cutbacks proposed in the new budget violate the government's side of the deal, so it is free to strike.


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