The Labor Party will not insist on a budget expansion as a condition for joining a government headed by Kadima chairwoman and Minister of Foreign Affairs Tzipi Livni, said sources close to Labor chairman and Minister of Defense Ehud Barak today.
Hitherto, the Labor Party demanded that the increase in government spending be raised to 2.5% of GDP from 1.7% as a condition in the coalition negotiations. However, after a meeting between Livni and Barak last night to which seven top economists were invited, the Labor Party decided to reconsider the demand and delay its implementation.
Labor Party sources said that the economists explained that a budget blowout was secondary compared with the likely effects of the global financial crisis on Israel. The Labor Party therefore decided to reconsider its economic demands.
Barak's aides nonetheless insisted that Labor's other economic demands, including old-age pensions, university tuition, and defense issues, were still in force. They predicted that an agreement would be reached quickly with Livni on these issues. The aides added that it was made clear during yesterday's meeting that the Ministry of Finance had financial resources for all the party's demands, and they therefore assume that the party and the ministry would bargain over the budget.
Barak today met Histadrut chairman Ofer Eini and Manufacturers Association president Shraga Brosh in Tel Aviv. Barak's aides said the meeting was part of the consultantions that he is holding about the economy. Barak has already twice met Governor of the Bank of Israel Prof. Stanley Fischer for this purpose.
Barak, Eini, and Brosh called on Fischer and Bar-On to set up a joint forum to discuss the crisis and Israel's preparation. Although Barak's aides said that the call would probably fall on deaf ears, a Livni aide said in response, "If the coalition partners are really worried about the economic situation, they should quickly join a government that will deal with the problems, rather than dragging out negotiations."
Livni's aides added that Bar-On opposed Barak's new demand. Bar-On reiterated that no Israeli bank was at risk of collapse, and that there was no need for government intervention in the crisis. "Barak's demand is totally unrealistic," said an aide. "Barak wants bailouts for tycoons who took insane risks. If pension funds or allotments were harmed, then there would be room to consider his demand."
Published by Globes [online], Israel business news - www.globes-online.com - on October 6, 2008
© Copyright of Globes Publisher Itonut (1983) Ltd. 2008