International credit ratings agency Moody's has warned Israel over the promises given by Prime Minister Benjamin Netanyahu to his coalition partners in signing the agreements to form his new government. The agreements involve concessions worth billions of shekels and Moody's is concerned that the new government will not be able to meet the budget deficit target for 2016.
"The concessions made in order to form the coalition will undoubtedly influence the Israeli government's 2016 budget," Moody's says.
Moody's analysts write that after Netanyahu's sweeping victory in the elections, the belief was that forming a coalition would be an easy task, but the negotiations were protracted and the decision of Avigdor Liberman to remain outside the coalition reshuffled the deck.
The survey recounts the unfolding of events during the formation of the coalition, the difficulties of having a narrow coalition of just 61 MKs and the demands of the constituent parties that according to Moody's will impose an overall cost of NIS 8 billion.
Moody's writes, "The new finance minister will find it hard to cut the deficit to 2.5% of GDP this year and 2% next year. While the improvement in the economy and tax revenues is expected to lead to an improvement in Israel's credit conditions this year, the concessions that were made during the coalition negotiations might lead to a worsening of the deficit in 2016.
Published by Globes [online], Israel business news - www.globes-online.com - on May 14, 2015
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