Israeli Prime Minister Benjamin Netanyahu arrives for a meeting of his Likud Party in Netanya on January 13, 2013
Israeli Prime Minister Benjamin Netanyahu waves to photographers as he arrives for a meeting of his Likud Party at the Mediterranean coastal city of Netanya on January 13, 2013. Israel's finance ministry has announced a 2012 budget deficit nearly twice the government's target, potentially posing a challenge to Netanyahu ahead of elections next week. © Jack Guez - AFP
Israeli Prime Minister Benjamin Netanyahu arrives for a meeting of his Likud Party in Netanya on January 13, 2013
AFP
Last updated: January 14, 2013

Israeli budget deficit twice as high as projected

Israel's finance ministry has announced a 2012 budget deficit nearly twice the government's target, potentially posing a challenge to Prime Minister Benjamin Netanyahu ahead of elections next week.

The announcement, made late on Sunday, put the deficit at 39 billion shekels ($10.5 billion/8.0 billion euros), nearly double the 20 billion shekel target set by the government.

"It is already clear now that the first political bombshell that (the next government) will have to defuse will be the 2013 state budget, which will be required to cover a higher deficit than expected and could lead to a coalition crisis," said the top-selling Yediot Aharonot.

But Netanyahu played down the announcement, reportedly telling a campaign meeting for his rightwing Likud party that the figure as a percentage of GDP was not significantly larger than expected.

"The figures were more or less expected," local media quoted him as saying.

"We were waiting for a deficit of 3.9 percent and in the end it was 4.2 percent," he added. "Our deficit is less than that of the Americans and the Europeans. I don't think that this will have consequences for Israeli citizens."

Speaking on Israeli television on Monday evening he said that he did not foresee any need for a tax rise as a consequence.

"I don't think that we'll need to raise taxes," he said. "I don't expect that it will effect the citizen's pocket."

He said that newly-discovered offshore gas fields expected to start pumping in 2013 might prove larger than forecast.

"It may be that gas reserves will be bigger than we think," he said. "Maybe international markets will recover and (our) exports will rise."

But the figures, a final revision of numbers released in 2012, were seized on by Netanyahu's political opponents, including Shelly Yachimovich of the centre-left Labour party -- Likud's strongest rival.

"Netanyahu is leading the Israeli economy to total collapse," Yachimovich said. Her Labour party is expected to be the second biggest party in the next Knesset, and has focused its platform on the country's socio-economic problems.

Naftali Bennett, who is expected to lead his Jewish Home faction to an almost unprecedented showing in the elections, also seized on the numbers to attack Likud.

"Even though they knew that their revenues were decreasing, the government continued to distribute money," he said. "We pay taxes and we deserve a government that doesn't behave in an extravagant manner."

Netanyahu has touted his government's economic performance during the campaign, arguing that he helped safely steer the country through the turbulent world financial crisis.

But he failed to win over many of the hundreds of thousands of Israelis who took to the streets in 2011 to protest the cost of living and increasing income disparity.

And the larger-than-projected deficit means the next government, which Netanyahu is widely expected to lead, will have to take painful austerity measures that are expected to be unpopular.

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