Netanyahu Pase Political Strength Tested by Israeli Budge

Israeli Prime Minister Benjamin Netanyahu weathered a test of his political strength Wednesday as the government budget was passed in its first vote in parliament.

Failure to pass the spending plan in three votes by Nov. 19 would trigger a collapse of the ruling coalition. Netanyahu’s Likud party heads a government that holds only a one-seat majority in the 120-seat Knesset.

The initial vote on the budget, which passed with 57 votes to 53 against, comes as economists are cutting forecasts for Israeli economic growth. The median forecast by economists surveyed by Bloomberg was pared last week to 2.7 percent from 3.3 percent. In 2016 and 2017, growth will be 3.3 percent and 3.5 percent, economists predicted, compared with 3.4 percent and 3.7 percent in the last survey.

Israel is in the midst of an economic slowdown and “there’s nothing in this budget to encourage growth,” lawmaker Erel Margalit of the opposition Zionist Union bloc said to Israel Radio. “There’s nothing to boost growth for the factories in the south, nothing to help small business in the center and north,” Margalit said.

“The fact that we have chosen not to increase the tax burden, as we promised, contributes greatly to growth,” Finance Minister Moshe Kahlon said in parliament.

‘Fiscal Responsibility’

The Finance Ministry is weighing plans to reduce value-added and corporate taxes, the ministry said in an e-mail. Reducing value-added tax to 17 percent from 18 percent would cut tax revenue by 4.5 billion shekels ($1.1 billion) a year, the ministry said.

The 2015-2016 budget has also drawn criticism from Bank of Israel Governor Karnit Flug, who said last month that the projected deficit of 2.9 percent of gross domestic product would send a message that the government is “lacking commitment to fiscal responsibility.”

Deputy Finance Minister Yitzhak Cohen deflected the criticism, invoking Israel’s 67 percent debt-to-GDP level.

“The deficit is very reasonable, completely reasonable,” Cohen said in an Israel Radio interview. “Don’t forget that Israel’s debt-to-GDP level is in good shape, one of the best in the OECD.”