Finance Minister Yair Lapid agreed on Friday to change his original plan and increase the deficit target to 4.65% for 2013 and 3% for 2014.
On Thursday it was reported that Lapid planned to increase the deficit target for 2013 to 4.9%. The move was met with anger because Lapid did not involve Prime Minister Binyamin Netanyahu in his deliberations.
Lapid’s decision surprised Bank of Israel head Stanley Fischer as well. Fischer reportedly first heard of the news on Thursday evening as he landed in the United States.
The increase to 4.65% would mean allowing Israel’s deficit to grow to 46 billion shekels. Raising it to 4.9% would have meant a deficit of 50 billion shekels. A statement from Lapid’s office said that the latest move was discussed with both Netanyahu and Fischer.
The original deficit target for 2013 was 1.5%. Former Finance Minister Yuval Steinitz then raised it to 3%.
Also on Thursday, Standard & Poor's Ratings Services lowered Israel’s long- and short-term local currency sovereign credit ratings to 'A+/A-1' from 'AA-/A-1+'.
Lapid was unfazed by the downgrade, saying, "The rating downgrade at this time is no surprise. This is a late response to the situation that we are now trying to correct. We have to look at ourselves in the mirror and honestly say: 2013 and 2014 are the years in which we shall close the overdraft, and as we fix it, we shall start to take off. We are now changing our order of priorities. The working person will be at the center; the cost of living will fall. Only that way can the economy grow and continue to maintain its standing.”
Lapid said shortly after entering office that he would deal with the deficit. “It’s time to deal with the overdraft. We’ll work hard, we’ll limit ourselves, we’ll reduce expenses, we will also have to cut where it’s most painful,” he wrote in a message to his supporters.
(Arutz Sheva’s North American Desk is keeping you updated until the start of Shabbat in New York. The time posted automatically on all Arutz Sheva articles, however, is Israeli time.)