The Israeli government has approved the two-year budget proposal for 2011-2012 and the new fiscal guideline proposed by the Ministry of finance, the Bank of Israel, and the National Economic Council. The new fiscal guideline, whereby the growth in government spending will be subject to the debt:GDP ratio and economic growth in the previous decade, was approved unanimously. The vote is a political achievement for Minister of Finance Yuval Steinitz. However, there were six abstentions in the vote on the bi-annual budget, five by Labor Party ministers, the fifth abstainer being Likud minister Dan Meridor.
Commenting on the result of the vote, Steinitz said, "The bi-annual budget will enable the government to present a long-term plan, will maintain stability in the economy, and will contribute to higher growth. In addition, after years in which government spending has not changed, today we approved a new fiscal guideline which will facilitate a correct balance between expanding infrastructures and public services, and economic growth. This guideline will ensure the maintenance of clear fiscal discipline and help us in our task of reducing Israel's national debt. These steps represent a real revolution in the government's economic policy and in composing the budget."
The finance minister introduced a two-year budget for 2009-2010 as part of the government's effort to cope with the effects of the global economic crisis and because the 2009 budget was not passed by the Knesset at the appropriate time. Since then, the first bi-annual budget has won praise from the IMF and the OECD.
The government decided that the bi-annual budget would be introduced as a temporary measure, and that the matter would be reviewed in the first half of 2012.
Published by Globes [online], Israel business news - www.globes-online.com - on March 4, 2010
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