Steinitz to propose scrapping spending limit

Finance Minister Yuval Steinitz will also ask the cabinet to approve another two-year budget.

Minister of Finance Yuval Steinitz is expected to submit to the cabinet a proposal that will upend the fiscal rules for public spending by the government. He proposes a new spending formula that will define public spending as a function of the average growth in the previous years while aiming for a debt-to-GDP ratio of 60%, the level stipulated in the EU Maastricht Treaty.

The current spending formula limits growth in government spending to 1.7% over the previous year, a figure that is in line with Israel's population growth rate. The new formula will let the government increase its spending in 2011 by 2.6% compared with 2010.

The Ministry of Finance said today that this will give the government greater flexibility even as it tries to reach the 60% debt-to-GDP ratio.

In the wake of passage of the two-year budget for 2009-10, and in view of recommendations by international agencies, including the OECD, Steinitz is also expected to ask the cabinet to approve another two-year budget for 2011-12. Later, the ministry will consider switching to two-year budgets on a permanent basis.

Published by Globes [online], Israel business news - www.globes-online.com - on February 23, 2010

© Copyright of Globes Publisher Itonut (1983) Ltd. 2010

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