BICOM

Bank of Israel Governor Stanley Fischer yesterday expressed support for the state budget for 2013 and 2014 outlined by Finance Minister Yair Lapid earlier this week.

Lapid’s plans, which have elicited criticism from opposition leaders and some ministerial colleagues, include a 1.5 per cent rise in income tax across all tax brackets from 2014. Among the other planned measures are reduced child allowances, a one per cent rise in VAT and a reduction in expenses in all government ministries. In total, state spending will be reduced by £4.5billion between August 2013 and the end of 2014.

Fischer had recommended that Israel’s deficit remain capped at three per cent, but Lapid’s plan will see that rise to 4.65 per cent of GDP in 2013 before dropping to three per cent next year. However, speaking yesterday, Fischer praised Lapid’s plan saying “While the program is complex and includes many steps… it’s a courageous program which combines the all-inclusive steps intended to return the budget framework to a responsible outline.”

Lapid has been widely criticised in the Israeli media this week for letting down the very middle class voters he courted during January’s election campaign, alleging that the budget plan hits them hardest. Fischer rejected the accusation, commenting “It is not possible to meet the fiscal challenge that we face by focusing solely on one section or another of the population. As the minister of finance has said, the entire community will have to bear the burden.”

Meanwhile, around one hundred protestors demonstrated outside Lapid’s home yesterday evening against the planned cuts and tax increases. Activists have indicated that a larger demonstration will take place on Saturday night. On the political front, Maariv claims that six government ministers are prepared to vote against Lapid’s budget as it currently stands.