Sharp mutual recriminations have been flying between members of the Trajtenberg committee and Minister of Finance Yuval Steinitz's staffers. The source of the dispute is over professional disagreements revealed by "Globes" yesterday about the need to change fiscal rules: to raise public spending and allow a possible temporary increase in the fiscal deficit.
The Ministry of Finance opposes any change to these rules, while Prof. Manuel Trajtenberg and several of his committee members want to change at least one of them.
In an interview with Hebrew daily "Yediot Ahronot", Steinitz said, "I am not prepared to commit to any additions. There will be no breach of the spending ceiling."
The Trajtenberg committee considers Steinitz's remarks as a declaration of war, as any recommendations without a budget supplement would be considered as a failure by the committee in general and by Trajtenberg in particular. This is why a top committee member told "Globes" today, "The finance minister is trying to frustrate the committee's work."
However, top economic officials in Jerusalem have a slightly different view of the matter. "Trajtenberg is under pressure. He wants to satisfy all the demands of this protest, which is impossible. He is determined become a great public hero in order to kick off a campaign to become finance minister," said an official.
A confrontation between Trajtenberg and Steinitz was inevitable the moment Prime Minister Benjamin Netanyahu decided to uproot economic policy planning - the Ministry of Finance's ultimate job - and give it to an external committee headed by Trajtenberg. Given that the Ministry of Finance will have the job of implementing the committees' recommendations (after submitting its recommendations, the Trajtenberg committee will be liquidated), the ministry can easily kill them off.
Furthermore, Steinitz can begin torpedoing the recommendations at the earliest stages, in the social-economic cabinet, which is expected to approve the recommendations, because he has preferential standing as the finance minister. On the other hand, the Trajtenberg committee can submit courageous recommendations that involve a substantial increase in the budget and therefore the deficit, while not bearing the cost or consequences.
When the Trajtenberg committee began its work, Steinitz and Trajtenberg held their well publicized meeting together with the committee heads. The meeting was mainly intended to give an impression of cooperation, coordination, and even mutual regard, but the display did not last for long.
The issue of implementing the committee's recommendations has arisen alongside the assessment that Netanyahu will want to see his man at the Ministry of Finance, who will ensure implementation, and achieve economic quiet. At one time, Trajtenberg's name was mentioned as a candidate for the position of Ministry of Finance director general - stories that Steinitz was quick to squelch - or as Prime Minister's Office director general.
Netanyahu will have to settle the dispute. Implementation of the Trajtenberg committee's recommendations will greatly depend on the identity of a future finance minister. Netanyahu could, if he wanted to, replace Steinitz with a Likud insider (Minister of Communications Moshe Kahlon has been mentioned), but he has refrained from doing so. Steinitz has been subject to a torrent of criticism for his personality and performance, stemmimg both from the Prime Minister's Office and his own ministry.
Steinitz's chief of staff David Sharan said in response, "The finance minister considered the Trajtenberg committee as a real and important opportunity for dealing with the cost of living in Israel, finding ways to narrow social gaps, such as by assisting mothers of young children. The finance minister has instructed all Finance Ministry officials to cooperate fully with the Trajtenberg committee and to formulate proposals and solutions on these issues.
"However, the minister has reiterated the need to maintain the budget framework and the economic policy principles that brought us out of the crisis, and led to robust growth and low unemployment, because any deviation from these principles in these dangerous times of renewed economic crisis in Europe and the US is liable to result in deterioration in the economy, for which everyone will pay the price."
The Trajtenberg committee declined to comment on the report.
Published by Globes [online], Israel business news - www.globes-online.com - on September 8, 2011
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