The Finance Ministry's economic program was approved by the
cabinet, by a large majority of 17-9 late Monday. The votes
against came from the five Shas ministers, three of Labor's
ministers (Dalia Itzik, Matan Vilnai and Ra'anan Cohen) and
David Levy (Gesher). Justice Minister Meir Sheetrit (Likud)
Finance Minister Silvan Shalom declared that the plan had
been approved "without any substantial changes."
Three significant changes were, nevertheless, made to the
plan before it was approved by the cabinet. First, the
treasury has dropped the idea of imposing a wage freeze in
2002 and 2003 by legislation; instead, it will try to
negotiate such a freeze with the Histadrut labor
Second, the tax benefits afforded to development towns, the
Negev and the settlements will be cut by about 50 percent.
Finally, the plan to cut some NIS 1 billion from child
allowances by reducing payments to families that do not serve
in the army will be amended, with the exact changes to be
determined by a committee comprised of Shalom, Prime Minister
Ariel Sharon, Defense Minister and Labor Party Chairman
Benjamin Ben-Eliezer and Labor and Social Affairs Minister
Shlomo Benizri (Shas).
Having passed the cabinet, has to be prepared for submission
to the Knesset.
Shalom declared that the plan would generate economic
stability and embodied both social justice and a clear
preference for the middle class and army veterans. While it
did include some painful elements, he said, these were
necessitated by the economic and security situation.
Bank of Israel Governor David Klein sharply criticized one of
the plan's key elements -- an increase in the budget deficit
during the period 2002-2005 -- saying it would cause interest
rates to rise and could damage Israel's international credit
ratings. Klein also objected to several of the tax hikes in
the plan, saying they would increase unemployment by making
it more expensive to hire workers.
UTJ has threatened to leave the government if the cuts
unfairly target the religious sector.