"Finance markets react fast and furious. They have no mercy. That is why credibility is important," Budget Director Gal Hershkowitz today in response to Prime Minister Benjamin Netanyahu and Minister of Finance Yuval Steinitz's decision to double the 2013 deficit target to 3% of GDP.
"There is an argument: 'See, all the countries are increasing debt'. I say, 'Look at what's happening to them. Financing costs have soared and the price is heavy'," said Hershkowitz, in reference to yields for Spanish and Italian government bonds.
Hershkowitz publicly and clearly opposed raising the deficit target so much. "As for the doubling of the deficit target, my position was the target should be no more than 2.5% of GDP. This target fits a permanent growth rate of around 3%, which is what is forecast for next year. The deficit target decided on is therefore too high. This target is liable to cause trouble if we are forced to take additional measures, and there's a strong risk that we will have to take additional measures, and there will be further deterioration."
Hershkowitz nonetheless refrained from criticizing Steinitz directly, saying, "The target set by the finance minister is reasonable. The important thing now is to clearly and immediately state how we're going to achieve it. There must be immediate clarification."
Published by Globes [online], Israel business news - www.globes-online.com - on June 28, 2012
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