Lapid cancels biannual budget

Finance Minister Yair Lapid announced on Sunday that Israel’s policy of passing biannual budgets, adopted by his predecessor, Yuval Steinitz, would be canceled and a yearly budget would be reinstated as of 2015.

The decision was reportedly made with the backing of Prime Minister Benjamin Netanyahu.

Lapid said economic policy is better served with an annual budget, blaming the current deficit on Steinitz’s biannual strategy. “The wide gaps between the projected outcomes of the biannual budget and the actual government income had led to the massive overdraft we are currently facing,” said Lapid.

“An annual plan for the economy minimizes the errors between the government’s projected and actual tax revenues, between economic plans and their execution. Such a plan allows for the timely identification of potential problems, creation of immediate solutions and budgetary accommodations over the fiscal year,” the Finance Ministry said in a statement.

The 2013-2014 budget is due to be approved in the coming months and will be in place through 2014.

MK Erel Margalit (Labor) congratulated Lapid “for doing the right thing” despite strong pressure from the treasury “to continue experimenting with the country’s economy.” He added it was now time to fight the large deficit, “caused by the biannual budget.”

On Saturday night, some 200 protesters gathered outside the north Tel Aviv home of Lapid in protest of potential budget cuts to social services.

Of the signs held aloft by demonstrators, some called on Lapid to provide funds for public housing, while others read “We are all Riki Cohen ” — in reference to a fictitious middle-class Hadera teacher created by Lapid in a Facebook post last week as the emblematic struggling Israeli — and “Yair, there are starving families.”

Earlier this week, Lapid wrote that his commitment as Israel’s newly installed finance minister was to safeguarding the economic stability of the middle class, and thus the country’s economy as a whole.

Before the Passover holiday last month, Lapid said in a newsletter to Yesh Atid supporters: “The picture that is slowly emerging before me is far worse than I imagined. Forget words like ‘deficit’ and ‘fiscal crisis’ — I will put it much more simply: I came to renovate the house, but I discovered that we have an overdraft. What kind of overdraft? Monstrous, ominous and growing.”

Israel’s budget deficit in 2012 reached NIS 39 billion or 4.2% of gross domestic product, more than double the state’s originally projection for the shortfall. Officials have said new taxes and severe cuts in public expenditures will have to be made in the new budget to bring the deficit under control.