The cabinet today approved a deficit target of 4.65% of GDP of 2013 and 3% for 2014 as submitted by Minister of Finance Yair Lapid. The target means a deficit of NIS 46 billion. All the cabinet ministers voted in favor of the proposal except Minister of Environmental Protection Amir Peretz who abstained.
On Thursday, Lapid caused an outcry when it was learned that he proposed raising the 2013 deficit target to 4.9% of GDP. This would be the first time since 1985 that the government would not meet its spending cap. "Globes" reported yesterday that neither Prime Minister Benjamin Netanyahu nor Governor of the Bank of Israel Prof. Stanley Fischer was notified of Lapid's decision.
Well-informed sources say that while Fischer wants a deficit target of 4% of GDP in 2013 and 3% in 2014, Lapid sought to raise this year's target to over 4% and next year's target to 3.5%. On Thursday, Lapid therefore announced the high deficit target of 4.9% of GDP, in order to subsequently lower it to 4.65%. He softened his position for 2014, and agreed to Fischer's target.
Other sources have a different version. They say that Lapid realized his mistake of unilaterally raising the deficit target so much, called Netanyahu to apologize, and then went ahead and again revised the target.
The original 2013 deficit target, set in the state budget for 2011-12, was 1.5% of GDP. But former Minister of Finance Yuval Steinitz and Netanyahu raised it to 3% when they realized that they had lost control of the budget. Lapid was forced to amend the fiscal aggregates when he realized that his proposed fiscal package, which would be part of the next economic plan, would not achieve the necessary amounts this year. The reason is technical: most of the austerity measures, on both the spending and revenues side, are not retroactive, or will only come into effect in the fourth quarter of this year.
Published by Globes [online], Israel business news - www.globes-online.com - on May 5, 2013
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