Comptroller to probe how state fell so far in debt

As the country simmers over proposed budget cuts and tax hikes, the state watchdog said Monday he would launch an inquiry into how Israel wound up some NIS 39 billion ($11 billion) in debt.

Comptroller Yosef Shapira was approached by both coalition and opposition legislators to look into the issue.

The national budget deficit in 2012 was double the projected two percent of Israel’s gross domestic product, despite tax increases enacted earlier in the year.

The ministry aimed for a 2012 budget deficit of approximately 2%, but higher spending and lower tax revenues than expected resulted in a 4.2% margin between government income and spending, an annual Finance Ministry report revealed.

Channel 2 reported Shapira would examine not only the technical and bureaucratic issues at the treasury, but also the decision-making process and functioning of Israel’s elected leadership.

Such an investigation could include the questioning of Prime Minister Benjamin Netanyahu and former finance minister Yuval Steinitz.

The large deficit forced recently appointed Finance Minister Yair Lapid to put forward a number of austerity measures, including tax hikes and cuts on governmental spending, which have generated harsh criticism.

Speaking at the start of a Cabinet meeting Monday morning, Netanyahu said that meetings late into Sunday night with defense officials produced a figure of NIS 3 billion ($840 million) to be cut from defense, and not the NIS 4 billion ($1.12 billion) that the government had originally asked for. The Defense Ministry had balked at the possibility of a NIS 4-billion cut, and had ideally been seeking increased funding to help finance defenses against growing threats stemming from regional instability.

“I believe the budget that I am proposing today finds the right balance between the needs of the economy and the needs of defense,” the prime minister said. “The most important thing is that the government passes the budget today. This decision about the defense budget will enable us to pass the budget. The state of Israel will have a budget by the end of the day.”

Discussions over the budget were ongoing as of 4 a.m. Tuesday.

Last week Lapid defended the austerity plan as a painful but necessary measure to rein in the deficit and prevent further financial troubles down the road.

“Yes, it’s tough,” he said. “We knew it would be tough… It’s tough and people are angry, but that’s the definition of taking responsibility: To do what’s tough, fully knowing that people will be angry with you.”