With deficit rising, Finance Ministry considers major cuts to public sector
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With deficit rising, Finance Ministry considers major cuts to public sector

Israel Katz says he’s not seeking mass layoffs; according to some reports, as much as NIS 45 billion could be cut from workers’ salaries, benefits over 3-year period

Then-foreign minister Israel Katz at a Likud election campaign stop in Jerusalem, September 16, 2019. (Yonatan Sindel/Flash90)
File: Israel Katz at a Likud election campaign stop in Jerusalem, September 16, 2019. (Yonatan Sindel/Flash90)

The Finance Ministry is considering cutting tens of billions of shekels from salaries and benefits in the public sector as part of belt-tightening measures in the wake of the coronavirus pandemic, according to reports Wednesday.

Finance Minister Israel Katz confirmed Wednesday that his ministry was looking at ways for the public sector to “share the burden and contribute to the fight against the coronavirus… We will hold dialogue on the issue.”

He told reporters in Jerusalem that there was no plan to let people go. “We’re not going to fire, but we’ll talk with the Histadrut labor federation chief on issues… that have monetary significance.”

Reports in Ynet, economic paper Calcalist and Army Radio said the plan would cut NIS 45 billion ($13 billion) from the state budget over three years, including lowering salaries for civil servants by some NIS 7 billion ($2 billion) and cuts to lavish state pensions enjoyed by some. Among the cuts being examined for that period are bonuses, R&R stipends, clothing allowances and some other types of per diems and state-funded benefits.

The reports garnered an immediate backlash.

Meretz party chief Nitzan Horowitz said the government must increase the national deficit “to grapple with the socio-economic catastrophe that is approaching,” rather than seek cuts to it.

“Hitting the salaries or work conditions of public sector workers — teachers, social workers, nurses — will not only be unhelpful in handling the economic crisis, it will exacerbate it,” he said.

MK Oded Forer of Yisrael Beytenu accused politicians of “reaching into the public’s pocket” during an unprecedented economic crisis.

Israel Teachers Union head Yaffa Ben-David told Army Radio she’d first heard of it in the media. “We’ll strongly oppose it,” she said.

The budget deficit rose to 6 percent of GDP in May, up from 4.8% in April. According to Calcalist, some estimates see the deficit rising to over 10% by year’s end.

The economy contracted by 7.1% in the first quarter of 2020 due to the coronavirus pandemic, the sharpest decline in 20 years, according to an estimate based on partial data released by the Central Bureau of Statistics in late May. The bureau noted that the contraction of the economy was more severe than after the 9/11 attacks and the 2008 global financial crash.

Israel’s unemployment rates also remain very high, at 21.2% — only somewhat better than the 27.8% peak at the height of the pandemic. These include some 862,000 unemployed and 605,000 on unpaid leave. In February, unemployment had been at a record low of 3.4%.

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