Yair Lapid
Photo: Gil Yohanan

Lapid: Without cuts economy would collapse

Finance minister admits austerity measures hit where it hurts, but urges awareness of bigger picture. 'Let's work together through tough times,' he says

Finance Minister Yair Lapid on Tuesday defended the package of cuts and unpopular austerity measures to be implemented as part of Israel's budget for the coming two years, saying that without the unpopular measures the country's economy would certainly collapse.


"Each times you seen on the news city squares going up in smoke in other countries, you should know that behind this are irresponsible statesmen," said Lapid referring to the recent upsets in Greece and Spain. "This will not happen on my watch. The way I'm proposing the tough times will pass quicker. In two years there will be another situation altogether. "


Related stories:


The proposal for the bi-annual budget includes cuts of NIS 6.5 billion (about $1.8 billion) in the government's activity in 2013, and NIS 18 billion ($5 billion) cuts in 2014.


In addition to cuts to ministries' budgets, the plan proposes tax hikes which will come into force immediately, and others which will be implemented in the beginning of 2014. The tax hikes are expected to increase the State's income by NIS 4 billion ($1.2 billion) in 2013 and NIS 14 billion ($3.9 billion) in 2014.


In a message posted on his Facebook wall – the minister's preferred medium for the communication of his ideas to the masses – Lapid said he empathized with the bitterness against the cuts. "Yes. It is tough. We knew it would be difficult, but it's not the same thing when you actually have to do it. It is hard, and people are angry, but that just means taking responsibility: to do the tough thing, in the full knowledge people are mad at you.


"We should not let anger blind us to the truth," the minister further added. "The other option was the collapse of the economy, no less. Were we to sit idly the budget hole would keep growing, as would the debts, and the social services would collapse."


The finance minister stressed the new budget includes biting tax hikes aimed at the top economic percentiles and corporations, adding it was crucial to look beyond the numbers to the larger picture. "It is true the middle classes took a hit in the short term, but the current cuts package represents a small part of a plan toward reducing the overall cost of living, create jobs, make housing affordable, to achieve an equal burden among different population sectors and improve the life of the working man.


"Tough times always leave one with two alternatives: to decide you're on your own, or work together to leave them behind," he signed off.


The plan also includes a series of economic steps advanced by the Finance Ministry as part of the Arrangements Law.


According to the proposal, income tax will be raised by 1.5% as of 2014, value added tax will go up by 1% to a level of 18%, corporate tax will increase to 26%, and taxes on cigarettes and alcohol will be raised.


In addition, housewives will now be forced to pay for national insurance and health insurance.


The proposal includes an immediate 1% cut in manpower in the Civil Service, and another 1% cut in early 2014. In addition, no new positions will be approved in the Civil Service until 2015, and as of that year the overtime budget will be slashed by 10%.


The plan also includes a NIS 1.5 billion ($420 million) cut in the education budget every year and a reduction of close to NIS 2 billion ($560 million) a year in child benefits. The Transportation Ministry budget will be cut by NIS 1.2 billion by postponing ministry's road building projects across the country.



פרסום ראשון: 05.07.13, 13:40
 new comment
This will delete your current comment