Bank of Israel: Raise taxes, cut budget

Central bank report contradicts Netanyahu and Steinitz's statements, recommends series of steps to bring down budget deficit to reasonable levels

Gad Lior|Published: 01.23.13 , 13:13

The government must raise taxes and make major cuts in the state budget in order to bring down the budget deficit to reasonable levels, the Bank of Israel says.

The central bank's recommendations to the government, which contradict statements made by Prime Minister Benjamin Netanyahu and Finance Minister Yuval Steinitz that they have no intention of raising taxes, are included in a report written more than two weeks ago, which has yet to be published as no discussions are being held on the state budget at the moment.

Political Dispute

Treasury posts budget deficit of NIS 39B

Ynet, Yedioth reporters

Centrist, leftist parties slam government for ending 2012 with deficit of 4.2% of GDP. 'Figures point to social hell and economic chaos,' says Yachimovich. Livni: Netanyahu leading Israel to bankruptcy

Treasury posts budget deficit of NIS 39B

Every year, during the budget discussions, the Bank of Israel releases an analysis of the state budget, the expected deficit and the budget targets. The report was scheduled to be published on January 7, but the central bank decided to postpone its release by several weeks until the start of the budget discussions.

Yedioth Ahronoth has learned that the report includes an analysis of the huge deficit in the state budget and an unequivocal declaration that the government will have to raise taxes and apply major cuts to the state budget.

The report also voices concerns over possible significant deficits in future state budgets after 2013 – unless immediate steps are taken.

The report determines that the cost of implementing the government's decisions in the fields of education, health, welfare, infrastructure and defense was significantly higher than the legal debt ceiling for 2013 and the following years. Closing this gap requires a reexamination of the list of priorities and an allotment of the budget accordingly.

The efforts to establish a new government are expected to begin immediately after the final election results are published. At the same time, the Finance Ministry will begin discussions to present the new government with the required economic steps

The Bank of Israel is expected to publish the report some time after the elections, and the prime minister will be presented with the recommendations of the government's economic advisor – Bank of Israel Governor Stanley Fischer.