Netanyahu plans new austerity measures

The prime minister has set up a secret team to deal with the fiscal deficit.

Ori Yogev, considered one of Prime Minister Benjamin Netanyahu closest associates, has joined a small team that is drawing up the state budget for 2013-14. The team's fiscal plan includes deep budget cuts and tax hikes to deal with the huge deficit.

The team's members include Ministry of Finance Budget Director Gal Hershkowitz and Prime Minister's Office director general Harel Locker. Yogev, a former budget director, was a key figure in preparing the budgets in 2009-10, and his intervention led to the resignation of then-budget director Ram Belnikov over Yogev's "secret" role, as he had no official function nor was he an elected official. After the budget was prepared, Netanyahu offered Yogev the position of Ministry of Finance director general, but he refused because of his work in his company Whitewater Technology Group.

In the talks between the three men, one of the proposals gaining ground for dealing with the NIS 15 billion budget cut necessary to meet the spending cap is to cut salaries and perks of public sector employees awarded in the past few years, such as generous pay hikes. Private sector salaries have been stagnant over the past four years.

Under the proposal, the budget will include cancellation of the most recent pay hike, of 1%, in the collective agreement signed between the state and Histadrut chairman Ofer Eini in 2009. This pay hike will cost an estimated NIS 1 billion. The three men also intend to cancel the tax exemption on advanced study funds, which costs the government NIS 2.4 billion in lost revenues a year. This exemption is considered one of the greatest fiscal distortions, because it is given to the country's strongest employees, including public sector employees, and especially to strong workers committees.

These two proposals, which will ignite a total war with the Histadrut (General Federation of Labor in Israel), will generate NIS 3.4 billion in revenues. Sources believe that the government will ultimately have to forego one of these demands. It should be noted that one of the reasons Yogev was added to the team was his joint work with Eini on the 2009-10 budget, when they cooperated on the package deal.

When he was budget director and chairman of Israel Railways, Yogev fought hard against the workers committees of Israel Railways and of the seaports. Talking to "Globes" last week, he slammed the Israel Ports Development & Assets Company Ltd. workers committee, saying that the workers received a pay hike, but that their check to the government bounced.

The team also intends to recommend tax hikes totaling several billion shekels, despite Netanyahu and Minister of Finance Yuval Steinitz's election campaign promises of no new taxes.

Published by Globes [online], Israel business news - - on January 29, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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