Olmert Calls Budget Test of Cabinet
Israeli Prime Minister Ehud Olmert urged the Cabinet to approve the 2009 budget on time, saying it was a test of the government's ability to carry out its duties in the period before he steps down.
“A government that can't approve the budget according to a timetable it set for itself is effectively declaring itself unable to act on any important matter,'' Olmert told ministers, according to a summary of his remarks posted on his office's Web site.
Olmert spoke as the Cabinet began deliberations on the 236- billion-shekel ($66 billion) 2009 spending package. He is due to step down as prime minister after the ruling Kadima Party chooses a new leader next month. If his successor fails to reconstitute the coalition, Israel will hold early elections.
The prime minister urged ministers in his four-party coalition to avoid “factional'' considerations and back the Finance Ministry's draft budget. The draft budget seeks about 7 billion shekels in cuts in order to meet targets for lower spending and the deficit.
The debate is the first of two the Cabinet will hold, with today's discussions focusing on amendments to the law needed to implement next year's budget. The budget calls for spending growth after inflation of 1.7 percent and a deficit ceiling of 1 percent of gross domestic product.
Israeli Law
After the Cabinet approves the budget, it goes to the Knesset, the country's parliament, which must give its consent by the end of the year. Under Israeli law, the 2008 budget will remain in force if parliament fails to approve a new spending plan.
Finance Minister Ronnie Bar-On gave the Cabinet two options for achieving the cuts. This could be accomplished mainly through reductions on defense spending, the option he favors, or by focusing spending cuts on social welfare instant payday loan.
Bar-On urged ministers who are seeking more spending to counter the effect of the slowdown to back the Finance Ministry plan, saying it amounted to a “counter-cyclical'' budget because spending was rising even as tax revenue was falling.
“I am determined to do everything in my ability to convince you to approve the budget in the coming week before we go into what is expected to be a political freeze,'' he told ministers in a transcript of remarks released by e-mail from the Finance Ministry.
Economic Growth
The budget comes up for approval at a time when Israeli economic growth is slowing and inflation is rising.
While the government ran a budget surplus of 1.86 billion shekels in the first seven months of this year, tax revenue has been falling because of slowing economic growth. Gross domestic product will expand 4.2 percent, the slowest since 2003, and will ease to 3.5 percent in 2009, the ministry said June 10.
Consumer prices rose an annual 4.8 percent in July, the Central Bureau of Statistics reported two days ago. That exceeded the median forecast of economists polled by Bloomberg by half a point.
The global economic slowdown and inflation may have “unexpected consequences'' on the Israeli economy, Olmert said today. He said Israel's GDP growth will be buoyed by “balanced'' fiscal policy and monetary-policy “discipline'' on the part of the Bank of Israel.
Filed under: economics by Wolf