Rivlin, Flug unanimous on need for new budget

The governor of the Bank of Israel, Karnit Flug, presents President Reuven Rivlin with the 2014 Bank of Israel Report.

Flug says the next government will not be able to count on the unofficial rule that every annual budget is 2.5% higher than the last at the government’s current rate of spending, in a comment that may hint that the next government will need to raise taxes.

“Israel’s society and economy has already shown in the past the ability to face long-term challenges and I am convinced that the new government will accept our recommendations, and will know how to implement them according to the government’s priorities. The Bank of Israel will, as always, stand alongside the government in order to assist with professional tools and experience,” Flug says.

Rivlin stresses the importance of the role played by the Bank of Israel and speaks of the difficulties the bank faces in the absence of a national budget.

“The Bank of Israel’s hands are tied as long as the state is running in 2015 according to a budget that was prepared in 2013.”

He makes further recommendations:

The Bank of Israel cannot act as a mechanism for stability in the market with the absence of a clear socioeconomic vision. In order to extricate the market from a slowdown in growth, it is not sufficient to lower interest rates; resources must be assigned for the integration of the Arab and ultra-Orthodox communities into the workforce; opportunities for foreign investment must be created; and other measures as well, none of which can be achieved with the lack of clarity created in the absence of a budget.