Steinitz praises unity, digs in for budget fight (JERUSALEM POST) By NIV ELIS 05/10/12)
JERUSALEM POST Articles-Index-Top
Preparing for what promises to be a bruising fight over the next
budget, Finance Minister Yuval Steinitz urged "responsibility and
discipline" in economic policy Wednesday.
“The budget will not be a simple one,” Steinitz said at the Globes
Finance and Capital Markets conference in Tel Aviv´s David
Intercontinental Hotel. "The thing that is most important
economically and socially - they go together - is high growth and low
Tuesday´s unity government agreement, which canceled early elections,
shortened the timetable for the Finance Ministry to submit its budget
from March 2013 until July 2012, leaving the ministry scrambling. The
government is tasked with reducing the budget by NIS 6.6 billion,
according to Globes.
Though there were no new budgetary numbers set yet, Steinitz
repeatedly warned that populist economic demands posed grave dangers
for Israel´s economy, saying that growth was more important
than "applause." In the last year, the ministry faced stringent
opposition to budget cuts from defense officials, labor unions and
the social justice movement. There will also likely be a need to
raise income taxes and the value added tax, always unpopular
Despite the time crunch imposed by the unity deal, Steinitz
emphasized that "a broad coalition is a blessing for the economy"
because it can act decisively and prevent uncertainty. Some of the
biggest economic worries in Europe, which could have negative
repercussions for Israel´s own economy, result from governance
problems, he said. Sunday elections installed a socialist president
in France and empowered anti-austerity parties in Greece.
Steinitz went to great lengths to defend Israel´s economic record,
which has looked less attractive given Wednesday´s decision by credit
rating agency Moody´s to downgrade Israel´s banking system outlook
from "stable" to "negative," and growing unemployment.
In its report, entitled "Banking System Outlook: Israel," Moody´s
predicted that GDP growth would decelerate significantly in 2012,
mainly due to weakening export demand stemming from the unresolved
euro zone crisis. The government expects growth to fall from 4.8
percent last year to 3.2% this year.
Moody´s was also pessimistic about Israel´s security outlook,
emphasizing "growing geopolitical tensions" that could compromise
business confidence and economic activity. The agency singled out the
Iranian nuclear program and the Arab Spring, which it referred to
as "changing political landscape in neighboring countries."
Maintaining the unemployment rate is another challenge for Israel´s
economy. Though the government proudly touted its 5.4% percent
unemployment rate at the end of 2011, the Central Bureau of
Statistics revealed in April that its measurement methods were not in
line with OECD standards, and the real unemployment rate was closer
to 6.5%. It has since risen to 6.9%.
According to Steinitz, Israel needs to add 50,000 new jobs each year
to keep unemployment on par with natural growth. Any efforts to
distract from a pro-growth budget, he warned would ultimately raise
unemployment further and reduce household income.
“Countries that avoid discipline," he concluded, "absorb difficult
hits to their economy and society."
Yoni Dayan and Globes contributed to this report. (© 1995-2011, The
Jerusalem Post 05/10/12)
Return to Top
MATERIAL REPRODUCED FOR EDUCATIONAL PURPOSES ONLY