Next year's state budget will take into account a 3.3-3.4% deficit, not the previously estimated 3.1%, according to this morning's economic discussion in the Prime Minister's Office. Governor of the Bank of Israel Karnit Flug announced at the discussion that the Bank of Israel had revised its growth forecast to 3%, following yesterday's interest rate cut. It was also decided that the government would discuss next Sunday a demand for a 2% cut in the budgets of all government ministries. The only exception is the Ministry of Defense; the across-the-board cut is entirely designed to pay for defense needs caused by the ongoing campaign in the south.
The meeting in the Prime Minister's Office was part of the discussions about next year's state budget and this year's financial management, in view of the continuing economic slowdown, the Ministry of Defense's large scale demands for covering the expenses of the war, and concern about the army's preparedness after the war. The discussion was attended by Prime Minister Benjamin Netanyahu, Prime Minister's Office director general Harel Locker, Minister of Finance Yair Lapid, Ministry of Finance director general Yael Andorn, Ministry of Finance Budget Director Amir Levy, National Economic Council chairman Prof. Eugene Kandel, and Governor of the Bank of Israel Karnit Flug, who was accompanied by Bank of Israel Research Department director Nathan Sussman.
Flug raised the subject of tax increases, and was supported by Kandel, but Lapid again removed it from the agenda, saying that higher taxes would only ruin the chances of growth. In the discussion, Lapid said with a grin that it looked to him like the two people proposing tax hikes had no personal experience in the business market, had not left their tidy offices, and might be looking at the situation from a purely academic perspective, albeit with a great deal of knowledge. He said the economy was not formulas, but life and growth. In the current situation, he added, you cannot eliminate the chances of employment and earnings.
Lapid told Netanyahu, who came straight from military headquarters, while he has been spending most of his time for almost a month, that his ministry did not intend to put obstacles the way of defense spending, as long as it was aimed at the fighters, the permanent army, rearming, and the defense needs of communities. He and his ministry, however, did not intend to give the Defense Ministry a blank check, and certainly not for wage agreements and pension terms.
Published by Globes [online], Israel business news - www.globes-online.com - on August 26, 2014
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