Ex-finance minister spars with Lapid over state of the economy

Former finance minister Yuval Steinitz on Sunday defended the state of the economy that he left to his successor, noting that any deep cuts that Finance Minister Yair Lapid would have to implement were the result of spending prompted by protests from the social justice movement. Steinitz was responding to accusations from Lapid, who complained that the expected budget cuts were due to a “monstrous” state of affairs that he encountered upon entering the Treasury.

Finance Ministry officials recently said that Israel was facing a larger deficit for 2012 than originally projected — 4.2 percent instead of 2% — necessitating further tax hikes and budget cuts.

Steinitz emphasized that there was a difference between the state of the economy and the state of the budget, telling Israel Radio that “the economy is in good condition… compared to the rest of the world; it’s the budget that’s in a bad way… It’s important to not confuse the state of the economy with the budget.”

Over the weekend, Lapid took to Facebook to decry the “monstrous deficit” faced by the country, which he blamed on “wasting money we didn’t have and making commitments we shouldn’t have made.” Without mentioning Steinitz by name, Lapid said that the cadre that preceded him in the Finance Ministry had taken inappropriate loans and had, in his words, “been partying.”

Steinitz — who has been shifted to the Ministry of International Relations, Intelligence and Strategic Affairs in Prime Minister Benjamin Netanyahu’s new cabinet — noted that, unlike the case in most other countries, Israel’s credit rating rose during his time at the helm of the economy.

That was “specifically due to good management,” he said. “However, the good management and the fact that the credit rating went up, that the economy is in good condition, doesn’t relieve the new finance minister from having to make harsh, especially large budget cuts.”

Steinitz blamed the budgetary woes on the social protest movement that swept through Israel in 2011, demanding affordable housing for a wider section of the populace. The protest, which filled the streets of Tel Aviv with tens of thousands of people in the summer of that year, led to the establishment in August 2011 of the Trajtenberg Committee, which was tasked with finding ways to alleviate socioeconomic problems. The committee’s findings included a range of recommendations covering housing, defense cuts and state-funded education from the age of three.

Steinitz said that pressure from the social protest drove the committee to make recommendations that, although commendable, required NIS 10 billion ($2.69 billion)cuts  to be implemented.

“Those billions need to be balanced,” he said. “It’s true that there are enormous commitments in the budget, which is why the cuts are deeper than usual.”

In a blog post to party followers on Saturday night, Lapid wrote that he would be forced to make severe cuts in “painful places.”

“He has begun to understand that the role of finance minister is a tough one,” Steinitz said.