The left-wing camp, more aligned with the socialist philosophy is accusing the government of harming the weaker economic class with a planned increase in value added tax of 1% in addition to a 1 billion NIS cut in the government budget. This seems to be the attitude of chareidi lawmakers as well; fearing new tax increases will make life for avreichim and their families increasingly difficult.

As things appear at present, there will also be a price hike on a number of items, including cigarettes, alcohol and gasoline.

Prime Minister Binyamin Netanyahu has nothing but praise for Finance Ministry Dr. Yuval Shteinitz, crediting him with keeping the nation’s economy stable during a period in which many nations are collapsing, seeking to reassure Israelis regarding the nation’s economic future. Mr. Netanyahu explained that he will not permit Israel to become Europe where a number of EU member nations are literally collapsing.

Ynet quotes Ran Melamed, Director-General of the NGO Yadid who feels that by raising the VAT, the government is taking the easy way out and this will deliver a major blow to the lower income families who are not making it already. Melamed adds that making things worse is the fact that the government has raised the cap for one’s eligibility for National Insurance (Bituach Leumi) payments.

Part of the government’s plan is to increase funding for the nation’s tax authority to permit it to increase tax collection efforts towards generating additional tax income.

As the government seeks to defend itself against an onslaught of opposition, one of the areas in which significant progress is being made is halting the influx of illegal aliens across the Egyptian border, illegals making their way from African nations. Government officials explain this operation costs money, big money, and those funds must come from somewhere, adding that by halting the wave of illegals into the country this will provide additional employment opportunities for citizens as well.

Prime Minister Netanyahu is not apologetic and he explains to his opponents “we cannot continue to allocate funds without an income” and this is why the tax increase and cut in government spending will be brought before the cabinet this coming Monday, 11 Menachem Av 5772. The prime minister countered against opponents, accusing them of being fiscally irresponsible for the nation’s economy is stable and in order to maintain this, spending cannot continue with income to back the government’s commitments. The prime minister insists that any opposition to the increase in VAT by 1% is cheap populist rhetoric, nothing more.

Following are the prime minister’s remarks from Tuesday, 5 Menachem Av 5772 at the start of his meeting with energy sector leaders:

“Not only has the economic tumult that we are in not lessened, but it is, in fact, strengthening.

“Last year saw lowered credit ratings for all of the leading countries; the US and the major countries in Europe. This did not happen to us because we stuck to the rules of responsible economic behavior and we will continue to do so.

“We know one simple rule in economics that must be maintained – ‘There is no free lunch.’ We are submitting a decision to provide free pre-school education but it costs money, it is never free. We are completing the fence in order to stop infiltrators. Sixteen infiltrators crossed in last week and were all put in detention. This is a success that costs money. We are deploying various technologies and new weapons and defense systems against the new threats – and this costs money. ‘There is no free lunch.’ In order to finance this we need to make the necessary corrections in the budgets and we will do so at next Monday’s Cabinet meeting and afterwards we will submit a responsible budget.

“Whoever says that it is possible to spend indiscriminately, without coverage, for populist objectives – is simply endangering the State of Israel and could easily bring it to the situation that we have seen in leading European economies that are on the verge of bankruptcy. This has not happened here and I will not allow it to happen here.

“We are maintaining security and the economy by acting responsibly. I intend to do the same thing in the energy sector. We need to develop, to enact many reforms and maintain a responsible framework for the country.”

Shteinitz has already announced his planned 10 billion NIS cut in the 2013 state budget, which will include cuts in monthly government payments and allocations as well as a cut in public sector salaries.

NGOs feel that the place to begin is not with increasing VAT, but by lightening the government payroll and beginning with the cabinet and deputy cabinet ministers.

The has approved an increase in the deficit to 3% contrary to the position of Bank of Israel Governor Prof. Stanley Fisher, but Shteinitz plans to present a list of cuts in the coming days and weeks that are aimed at lowering the deficit, a move that he insists is imperative towards maintain the nation’s stable economy.

Shteinitz stated that he remains confident that Israel can continue riding out the global economic storm and avoiding an “economic catastrophe” but to do this, the measures mentioned must be implemented.

(YWN – Israel Desk, Jerusalem)