Netanyahu, Lapid Trying To Smooth out Budget Bulge

YERUSHALAYIM -

Prime Minister Binyamin Netanyahu and Finance Minister Yair Lapid failed to finalize the budget at a meeting Sunday afternoon, although they had agreed to the broad outlines.

The two were expected to meet in hopes of reaching an agreement before Netanyahu leaves on a trip to the U.S. after Rosh Hashanah.

According to Globes, their preliminary plan calls for the defense budget to grow by 6 billion shekels in 2015, approval of Lapid’s 0% VAT for first-time home-buyers, and no tax raise. Regarding the fiscal deficit, the target will be raised by more than NIS 9 billion, from 2.5% of GDP to 3.4%, with no budget cuts, and more vigorous tax collection.

The Defense Ministry is demanding a supplement of NIS 11 billion in 2015, and dissatisfaction with the interim disclosures was registered immediately.

“Nothing is closed and there is no agreement,” a Defense Ministry source said of the outline. “It just won’t happen that we’ll agree to a NIS 6 billion supplement. We need more. Both sides understand that such a sum is not connected to any reality and certainly doesn’t answer the major needs that screamed out during the last operation in Gaza.”

In other financial news, Standard & Poor’s reiterated its sovereign ratings for Israel, describing the fiscal effects of Operation Protective Edge in Gaza as minor.

“In our view, the recent Gaza conflict will lead to only a modest weakening of Israel’s fiscal trajectory. Although Israel may temporarily reverse its fiscal consolidation, we expect its gross general government debt ratio to remain largely flat in the next three years,” the agency says in affirming its ‘A+/A-1’ foreign and local currency sovereign credit ratings on Israel, with a stable outlook.

“The stable outlook reflects our view that the government will maintain stable public finances and that the impact of security risks on the Israeli economy will be contained,” Standard & Poor’s said.