Bank of Israel Governor Stanley Fischer said the law limiting the yearly increase in government spending can be amended and this is better than raising the deficit next year.
It’s preferable for the government to keep spending within the current limit, raise taxes and maintain the deficit below 3 percent of gross domestic product, though it may not be politically possible to do so, Fischer said. If the government is forced to choose, it should raise the spending limit instead of increasing the deficit, he said.
“Is this an excellent idea?” Fischer, 69, said at a Bank of Israel conference in Jerusalem. “No, but the Finance Ministry and the politicians need to draft a budget.”
Fischer has been calling on the government to rein in the budget deficit, which he said will reach about 4.2 percent of GDP this year, more than double the original plan. Prime Minister Benjamin Netanyahu called early elections, scheduled for Jan. 22, citing opposition from partners in the coalition government to his budget plan.
Fischer said that the government has made commitments for next year that amount to a 10 percent increase in spending, double the increase permitted under the current fiscal rule. Israel’s security situation has worsened considerably, and this also needs to be taken into account, he said.
“To convince people in a democracy to get less than they want to get isn’t easy,” said Fischer. “This is the work of politicians, and it isn’t work that I would consider pleasant, but someone has to do it, and they volunteered.”
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