Absent from Sunday's budget meeting at 6 pm at the office of Prime Minister Benjamin Netanyahu were Governor of the Bank of Israel Prof. Stanley Fischer, the director of central bank' research department Prof. Nathan Sussman, and the research department's head of the public sector Adi Bernard who normally participate in cabinet and Ministry of Finance budget meetings.
Ministry of Finance Accountant General Michal Abadi-Boiangiu, who is responsible for implementing the state budget, was also absent, as was State Revenues Administration acting director Frieda Israeli. Budget department deputy director (macro) Eyal Epstein, an expert in budget number-crunching, was present, but was asked to leave, along with other Budget Department officials.
The hour-long meeting was held immediately after Netanyahu met with World Chess Championship runner-up Boris Gelfand, and a brief round of chess.
The absentees were the macroeconomic experts and the professionals marked as being realistic when it comes to the real and difficult condition of the state budget for 2012. The absentees, because they were not invited, were the officials liable to ruin the picture of economic success that Minister of Finance Yuval Steinitz and the seriously weakened Ministry of Finance wants to portray. The absentees were the officials defined as pessimists, and even and not with endearment, as radical conservatives.
The officials who marched in step with Steinitz to the Prime Minister's Bureau were Deputy Minister of Finance Yitzhak Cohen from Shas, Ministry of Finance director general Doron Cohen, Budget Director Gal Hershkowitz, and their aides. All these men are defined as optimists, the men who tend to prettify the threatening reality with rosy hopes. They say that the crisis in Europe will be OK, growth has resumed in the US, Israeli exports will grow, the business sector will expand, Israelis will go on shopping sprees, the Tax Authority will find concealed money or other planned sources of tax revenues (like the trapped capital of companies such as Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA), Check Point Software Technologies Ltd. (Nasdaq: CHKP), Israel Chemicals Ltd. (TASE: ICL), and Intel Corporation (Nasdaq: INTC)), maybe home prices will rise generating billions of shekels in taxes. Maybe all this will happen in 2012.
All this will close the NIS 20 billion, or NIS 30 billion or NIS 40 billion budget shortfall.
Participants at the meeting from the Prime Minister's Bureau were director general Harel Locker, National Economics Council chairman Prof. Eugene Kandell - two men who have advised on the budget every step of the way - both because that is their job, but mainly because it was Netanyahu's decision.
A few weeks ago, Netanyahu ordered Locker to bring forward the regular discussions with the Ministry of Finance and to put numbers and plans into them, and most of all, to obtain real models.
Netanyahu, the Finance Minister supreme, who has previously served as both prime minister and finance minister during equally dangerous economic times as now, knows and has already identified the Ministry of Finance's interest in managing the books, and submitting a budget that is more than just smoke and mirrors, and he first of all wants to see a realistic picture and realistic budget.
About a week ago, Bernard presented data about "Meeting multi-year fiscal targets for decisions regarding individual policy steps. Israel 1985-2011 and policy repercussions to 2013 and after. And this is what he wrote about the 2013 budget(and after it). "Maintaining an expenditure ceiling requires reducing government expenditure by NIS 7 billion. If the defense budget will grow according to media estimates, the required reduction will rise to at least NIS 10 billion excluding defense. An example of the scope of such cuts would be cancelling the Trajtenberg Committee recommendations, reducing health coverage, child allowances and pensions by 10%, and reducing infrastructure investment by one sixth. After 2013 additional cuts will be needed."
He continues, "If the expenditure ceiling is maintained then taxes must be hiked by NIS 22 billion so as not to exceed the deficit ceiling. If this happens it would mean raising all income tax levels, raising companies tax by 2%, cancelling the VAT exemption on fruit and vegetables, raising excise on gasoline by NIS 0.40, and NIS 2 billion in other taxes. All this on the assumption that there won't be a crisis either globally, or in Israel. In 2014 more significiant tax hikes will be required."
Published by Globes [online], Israel business news - www.globes-online.com - on June 4, 2012
© Copyright of Globes Publisher Itonut (1983) Ltd. 2012