The cabinet on Monday will be asked to approve yet another series of financial measures, which include billions of shekels in tax hikes and budget cuts in order to plug a growing deficit in the State budget.The impending economic measures will be presented by Finance Minister Yuval Steinitz and will attempt to cover the NIS 12 billion (about $3 billion) "hole" in the 2013 budget, which is expected due to a drop in tax revenues.
While doubling the deficit target will allow the government to increase the 2013 budget by NIS 15 billion (about $3.7 billion), the deficit is still expected to amount to about NIS 5 billion ($1.2 billion).
The government will need to cover the impending deficit by further cutting ministries' budgets with aim of reducing the government's spending by NIS 1.29 billion ($319 million).
In 2012, the State reached the legal limit of NIS 7 billion ($1.7 billion), for exceeding government spending, meaning the government will need to approve an additional NIS 5 billion cut in the budget in order to meet the expenditure goals.
In March, the Bank of Israel predicted that the Knesset will most likely have to approve a series of government expenditures in 2012 in order to cover an unprecedented NIS 6.4 billion (approx. $1.7 billion) gap in the budget. According to financial assessments, the deficit is much higher today than what was predicted by the Bank of Israel back in March.
Bank of Israel Governor Stanley Fischer addressed the expected budget cuts, calling them "a necessary evil": "If we don't deal with the major fiscal breach in the 2012 budget, we will find ourselves having to deal with an even larger deficit in 2013," he said.
"Therefore, the prime minister and finance minister's steps are brave and essential for improving Israel's budgetary situation in 2013."
Labor Party Chairwoman Shelly Yachimovich further said that "the budget cuts that will be voted upon on Monday prove once again that the prime minister made an error in his taxation policies which mainly subject the middle-class to the continuing tax hikes."
Yachimovich further relied on data which was compiled by her office that shows that "67% of the government’s planned tax increases are regressive," meaning that the taxation increases will mainly affect the poorer populating in Israel.
Yachimovich said that the document which will be presented to the government was changed several times depending on Netanyahu's mood. She further noted that on the eve of the last elections, Netanyahu promised that he would reduce taxed by 20%, "a promise," Yachimovich added "which was irresponsible and delusional, and is now blowing up in his face leaving Israel's citizen's to pay the price."
Zvi Lavi contributed to this report