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July 2, 2013 3:49 pm

Lapid: Without Austerity Measures, Deficit Could ‘Bury’ Israel

avatar by Zach Pontz

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Yair Lapid, leader of the Yesh Atid party.

Israeli Finance Minister Yair Lapid has warned that allowing Israel’s deficit to grow would “bury” the country, Globes reported Tuesday.

“We must make changes together. We must do this in two stages. The first, and short step is to emerge from the deficit. The steps we’ve taken are painful, I admit it. Raising VAT is painful, raising income tax is painful, but you are people who understand budgets, so it is easy for me to explain this to you: the deficit is not a one-time event, it’s structural. If we don’t stop it now, it will continue to grow and grow until it buries us,” Lapid said in his opening remarks at the Union of Local Authorities in Israel.

“If we don’t take all these loathsome measures now, next year, in 2014, the budget hole would grow to NIS 62.2 billion, and in 2015 it would exceed NIS 70 billion. This means collapse, and it is my job to protect the country from collapse. People complain about taxes and they are right, but the worst blow to a person is the loss of his or her job, and this is what we have prevented.”

Lapid said that the measures he has taken have prevented Israel from experiencing the same economic conditions as in Europe. “25% of young people in the bloc are unemployed. More than 50% of young people in Spain are unemployed, and almost 60% of young people in Greece. That is what we have prevented.”

“Our real test is our ability to work together. This test rests on three pillars. The first pillar is jobs. Israel’s unemployment rate is low, less than 7%, but it is artificially low. It is low because we have entire communities, especially haredi (ultra-orthodox) men and Arab women, who are simply not part of the equation. They are not recorded as unemployed because they are not even looking for work. We’re now changing this.”

Lapid also laid out his vision for strengthening Israel’s economy through a mix of hi-tech know-how, cultivating small businesses, and attracting corporations from overseas.

“The format of equal sharing of the burden, together with the national job training plan which we are now building with the Ministry of the Economy, will change the Israeli labor market. We will train people to work in high tech and industry, and we will support local ventures and small businesses, we’ll strengthen regional industrial zones in the north and the south, and will give tax breaks to every multinational which will establish development centers and factories here, creating jobs and which will put us at the forefront of global technology and innovation,” he concluded.

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  • Mel

    All Irareli economists [and hopefully, citizens] need do to appreciate their economic abyss is view how the United States’ National Debt has castrated Washington.
    If Jerusalem doubts official Washington’s political claims, why would it trust their fiscal numbers. Don’t ask Washington. The Wall Street Journal might be a good starting point.

  • Talia

    I just don’t understand, how come the ministers and the judges, who obviously understand the economy just as well as Minister Lapid, didn’t agree to a 10% cut in their salaries, instead they agreed to a cut of 1%, and their salaries are much nicer than the average people of Israel.

  • Vivienne Leijonhufvud

    Mr Lapid has confronted some pretty serious financial problems in Israel. I may not live in Israel, however, I live within the EU. As Mr Lapid rightly states high unemployment amongst the young is a serious problem in Europe. Many young Irish have left for Australia, Spain and Greece are deeply affected. Returning to the Irish problems, much of their problems are of their own making. Namely allowing corruption to go on, Irish banks have little experience of International Banking practices in particular AIB (Anglo Irish). Ireland sold her oil fields out to Shell, Israel is retaining hers and in the long will assist quicker recovery from austere measures. Ireland is awash with empty property both commercial and domestic. Too many inexperienced property developers borrowing at low interest rate, then unable to sell, consequence government collects no stamp duty (a form of tax) on sale of properties – same as Spain. The taxes on a wage earning population is draconian. Population 4.5 million, less than a third working and paying tax at high rates. So in defense of Israels’ Chancellor Finance Minister he is in fact averting a major disaster financially. Yes Haredi need to contribute to the tax burden as everyone else. 18 plus men and women in Haredi need to defend the nation. I personally feel religious studies be carried out by those past early retirement and those below 18. Israel cannot afford to maintain such high numbers on Welfare. When the arabic states become united, Israel will have to deal with many uneducated and likely unemployable Israeli Arabs. Israel is a well run nation and those of the Judaic faith have an inane ability to understand finance, tenacity to succeed and survive.

  • Harry Orenstein, FRICS

    Margaret Thatcher’s legacy to the world does not seem to count with Lapid. Despite the fact that the UK had started to develop the North Sea oil and gas fields Thatcher faced opposition from a strident National Union organisation (aka Histadrut) and a burgeoning Civil Service that was sucking Britain dry (economically).
    Lapid needs to implement the “short sharp shock,” face-off the Unions, cut government employment! Instead he tinkers with the tax-take claiming that he is looking to “equal sharing of the burden” – which he is not, as every Israeli (fule) knows!
    Lapid is for turning, otherwise he will be leading us to wreck and ruin. Most talented young Israeli’s are now tempted to seek employment overseas, as they cannot make-ends-meet on the meager salaries at home.
    Reform central and regional government quickly with early retirement packages and a host of other incentives paid for by the bounty of natural gas and break the Histadrut
    stranglehold on our economy.

  • HaroldT

    To ease Israel’s finances –
    The answer to the Haredi military question is surely that contributions to religous institutions must be based on a per capita payment. Any student reaching the age of 18 and not entering the military will no longer be subsidised. Candidates returning to religous institutions after completing military training would qualify for continued subsidy.