Israel's budget a political hot potato

NEW YORK (Reuters) - Whether or not Israeli Prime Minister Benjamin Netanyahu calls for early elections is a toss-up, according to the nation's finance minister, who said he did not expect to deliver a budget until early October.

The budget is the political arena in which Netanyahu will see if his thin majority in the Israeli Knesset, which includes ultra-orthodox religious parties, can agree on spending priorities for 2013.

Asked if elections will be called early, Steinitz replied: "I don't know. 50/50 percent." A national ballot is due in late 2013.

"I think we will know with some certainty after Sukkot," which begins the evening of September 30. "We will finally know if the coalition is strong enough to deliver the 2013 budget," Steinitz said on Monday on the sidelines of an Israeli investment conference co-sponsored by The Wall Street Journal and its sister publication, Barron's.

Sukkot, the Jewish festival commemorating the Jews' Biblical wanderings in the wilderness, ends Oct 7.

Steinitz highlighted the prime minister's victory in July, when the cabinet approved a package of tax hikes and spending cuts aimed at reining in the nation's budget deficit by a vote of 20-9.

Netanyahu has been under pressure from Israel's central bank to maintain fiscal credibility at a time when the economy is slowing and tax revenues are falling short.

The ultra-Orthodox Shas and centrist Independence parties, two of the five coalition partners, voted against the austerity package.

Steinitz said his office is prepared to present a budget on time, which historically means sometime in September or October in order to get it cleared for the January 1 start to the fiscal year.

Officially, he said, the budget calls for 14 billion shekels worth of cuts in order to reach a 3 percent of GDP deficit target. The figure could be smaller, perhaps 10 billion shekels, he said.

"We know that all our coalition partners are telling us that they would like to support the new budget, although it is difficult. But we want more than that," Steinitz said.

"We want them to guarantee that they don't desert us in the middle of the process, that if they support the budget in the government that they support it through the Knesset," he said.

Netanyahu's governing coalition holds a slim 66 seats in the 120 seat Knesset after the centrist Kadima party bolted in July after two months of partnership when its leader accused Netanyahu of giving in to ultra-Orthodox Jews in a battle over military conscription.

SLOWING GROWTH

Economic growth in 2013 is expected to hold steady versus the current year, Steinitz said.

"The last (2013) forecast that was published was 3.7 percent. It will be updated. It will be below this, but I don't know if significantly below. It will be between this and 3.0 percent," he said.

Steinitz reiterated the 3.2 percent gross domestic product growth target for 2012.

He said the falling economic growth forecast was due primarily to three factors, the biggest of which is Europe's credit crisis and the negative impact on Israel's exports.

"Also the tension (with Iran) maybe it is having an impact. Also the social unrest in Israel did have some impact on the local business community, revenues of mainly local companies," he said.

Netanyahu said in an interview aired by Canada's CBC television on Sunday that Israel and the United States are in discussions on setting a clear "red line" on curbing Iran's nuclear ambitions.

Israel's economy weathered the global economic crisis well until a year ago, when exports began to slow as a result of downturns in Europe and the United States, its two largest trading partners. Exports account for about 40 percent of Israel's economic activity.

When the austerity measures were approved, they drew heavy criticism from opposition leaders and even some government officials for attacking the middle class at a time when the public has been protesting the high cost of living.

$1=IS 3.9608

(Additional reporting by Steven Scheer in Jerusalem; Editing by Dan Grebler)

Source: http://news.yahoo.com/israels-budget-political-hot-potato-205818319.html

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