Israeli Parliament Passes Netanyahu 2013-2014 Government Budget

Israel’s parliament approved Prime Minister Benjamin Netanyahu’s 2013-2014 budget today, cutting planned outlays and raising taxes to rein in the deficit.

The Knesset voted 58 to 43 in favor of the package, which includes spending of 395 billion shekels ($110 billion) in 2013 and 405 billion shekels the following year. The plan, which trims spending on items ranging from defense to Jewish seminaries, aims to lay the foundation for growth, Finance Minister Yair Lapid said.

“We had to take care of the spiraling deficit, which could have widened in a year or two from 40 billion shekels to 50 billion and then to 70 billion,” Lapid said during the parliamentary debate. “We decided to show leadership: to draft a budget that isn’t easy, but still takes care of the middle class.”

Slowing global growth has reduced demand for Israeli products, moderating the economic expansion of the export-dependent economy and cutting into tax revenue. An increase in government spending on items such as free day care for toddlers, implemented following mass protests in 2011 over the high cost of living, also widened the deficit.

The budget plan is financed in part by an increase in value added tax and income tax. The planned deficit for 2013 is 4.65 percent of gross domestic product and 3 percent in 2014.

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