Netanyahu: Pact with Histadrut won't wreck budget

Histadrut chairman MK Amir Perez: I won't support the budget, despite the agreement.

Most of the severe measures against public sector employees that the Ministry of Finance planned to include in the 2005 budget have been rescinded, at a cost of NIS 2 billion.

The Ministry of Finance and Histadrut (General Federation of Labor in Israel) signed an agreement in principle last night. Under the agreement, the Ministry of Finance agreed to rescind three new taxes: on advanced training funds, on severance pay, and on shift work. In exchange, the Histadrut agreed to postpone a cost-of-living increment for public sector employees to 2006, and not to go on strike.

Minister of Finance Benjamin Netanyahu said the agreement would not breach the budget framework, thanks to an increase in tax revenues and previous cuts.

Ministry of Finance director of wages Yuval Rachlevsky confirmed that the agreement had caused a NIS 500 million budget shortfall. He expressed hope that higher tax revenues would prevent the need for a tax hike. He said the Histadrut had pledged industrial quiet until July.

The agreement in principle should enable passage of the 2005 budget by the Knesset.

Following the agreement, Histadrut chairman MK Amir Perez (Labor) said, "Today, Israeli citizens realize that we are the moderating factor that wants to convert agreements into leverage for the sake of the economy. The Ministry of Finance also realized that the use of force involves a great disadvantage."

Perez said the agreement between One Nation and Labor explicitly stipulates that One Nation is not obligated to join the coalition. "We've pledged to preserve our world-view. The Ministry of Finance's concessions are the results of negotiations and understandings. There is no connection to the real struggle on changing world-views. There is a chasm between the minister of finance's world-view and mine. I won't sacrifice my world-view on the altar of unity or on the altar of disengagement. I continue to fight against social gaps. I'm not a party in the coalition game. I won't be a minister in the national unity government. I don’t intend to support the state budget; I'll continue to oppose it."

Perez added, "We won't let anyone be fired. We've said there won't be industrial quiet. All other issues are open as far as we're concerned, and the struggle over them will continue. We're demanding salary increments and improvements in many allocations. We're demanding an increase in the minimum wage. That is why this is an interim agreement, which certainly creates a new atmosphere. But let no one have illusions - we're still standing guard."

Prime Minister Ariel Sharon is pleased by the agreement in principle, and would like more cooperation between the government and the Histadrut. At the start of today's cabinet meeting, he said, "I want to congratulate Netanyahu and Perez on their agreement. I've always said, and I reiterate, that it's better to reach consensual agreements. I hope that we'll be able to work together in the future, too."

Published by Globes [online], Israel business news - www.globes.co.il - on December 12, 2004

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