Major cuts are expected in Israel following a Bank of Israel report which said that the government needs to pull NIS 18 billion (£3bn) out of its welfare budget next year.
The Finance Ministry is now caught in a tug-of-war between the government’s welfare departments and a very nervous defence establishment.
The bottom line is expected to be a trade-off between defence and civil spending, according to Tel Aviv University economist Eran Yashiv.
Given the strength of the defence establishment and the pecking order of civil priorities, “if the treasury accepts these recommendations from the Bank of Israel, it’s likely to affect the weak groups,” said Dr Yashiv.
Labour parliamentarian Itzik Shmueli, a leader of the mass social protests of 2011, said: “The people who will be most affected by the spending cuts will naturally be those with low income. With these insufficient for a dignified manner of living already, further cuts will be disastrous.”
The cuts are expected to hit the Charedi community especially hard. However, the government is trying to steer the public discussions towards what opportunities investment in Charedi employment can bring.
On Sunday, the cabinet approved the creation of a panel to integrate Charedim into the workforce. Prime Minister Benjamin Netanyahu called this “the right step in the right direction”.
In its report, the Bank of Israel praised the deficit reduction programme in the 2013-2014 budget, saying that it “restored the credibility of the government’s commitment to the declining deficit path set in 2009, which is expected to reduce the debt to GDP ratio
to about 60 per cent by the end of the decade”.
