The government is set to approve a two-year budget for 2011-12 at the upcoming cabinet meeting on Thursday. As first reported by "Globes", in view of recommendations by international organizations, including the OECD, Minister of Finance Yuval Steinitz is expected to submit the proposal to the cabinet.
Political sources believe that, in view of the political quiet that Prime Minister Benjamin Netanyahu acquired with the 2009-10 two-year budget, the cabinet will approve Steinitz's proposal for another two-year budget.
There is no general decision at this time to make two-year budgets permanent, though the idea will be considered in future. The Knesset would also have to pass legislation for such a process.
The cabinet is also due to discuss Steinitz's proposal to change the fiscal rules for increasing public spending by the government. The new fiscal rule redefines government spending as a function of the average GDP growth in preceding years, as well as a government move to reduce the debt-to-GDP ratio to 60%, as mandated in the EU Maastricht Treaty.
The current spending formula limited growth in government spending to 1.7%, similar to the population growth rate. The new formula will let the government increase its spending in 2011 by 2.6% compared with 2010. The Ministry of Finance says that the new formula will give it greater flexibility, even while it tries to lower Israel's debt-to-GDP ratio to 60%.
Published by Globes [online], Israel business news - www.globes-online.com - on March 2, 2010
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