A comprise is emerging between the Ministry of Finance and Histadrut chairman Ofer Eini ahead of the cabinet vote on the 2009-10 budget next week, under which the spending cap will be raised without increasing the deficit target.
In an effort to ward off the coalition crisis threatened by the Labor Party because of the government's decision to keep the 1.7% government spending cap and the Ministry of Finance's proposed cuts, Minister of Finance Yuval Steinitz and Eini have been holding intensive talks in the past few days to reach a compromise. The two men held a one-on-one meeting on Tuesday, after which Prime Minister Benjamin Netanyahu was updated on progress.
At the moment, it appears that Steinitz and Eini will be able to fend off the coalition crisis, and reach a deal under which the cap on government spending will be raised to 2.5% (the final figure is not yet clear), and the deficit target will be kept at 6% of GDP.
At the last cabinet meeting, Ministry of Finance director general Yarom Ariav said, "There's a wall-to-wall consensus that exceeding the 6% deficit target is not possible." The parties are trying to hammer out a deal to raise only the spending cap.
Options under consideration include boosting tax revenues, either by abolishing tax exemptions and correcting distortions, such as raising the tax on cigarettes and limiting the number of cigarettes that can be bought duty-free, cancelling Eilat's VAT exempt status, and cancelling the tax exemption on gains on advanced training funds.
There are still gaps between the Ministry of Finance and the Histadrut's positions. The Ministry of Finance believes that, to reach an agreement, Eini must agree to concessions in the public sector, including a wage freeze. The ministry also wants Eini to compromise on structural reforms that the ministry wants to pass in the 2009 economics arrangements bill, including in the electricity market and seaports. The ministry also wants Eini's agreement on raising the retirement age for IDF career officers and NCOs, and other cuts planned for the IDF, which are included in the bill.
Published by Globes [online], Israel business news - www.globes-online.com - on May 7, 2009
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