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Peres Presents Austerity Budget; Cuts in Jobs and Wages Expected

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Finance Minister Shimon Peres presented a $30 billion budget to the Knesset Tuesday. It reflects the country’s economic woes and means belt-tightening for most Israelis.

The budget is for the new fiscal year, which begins April 1. About 40 percent is earmarked to service foreign debts. Another 22 percent is for the military and police, leaving 38 percent for every other government activity and obligation.

Real wages are expected to decline and some 4,000 civil servants, about 10 percent of the government work force, will be laid off.

Peres said his goal is to bring inflation down to “European levels,” as quickly as possible, by a closer linkage of wages to productivity, spending restraints and structural changes.

He said top priority would go toward increasing exports. He warned that excessive price increases would cancel out the recent devaluation of the shekel, which was intended to make Israeli products less expensive abroad.

The devaluation has accelerated inflation, which is running at about 18 percent, higher than last year.

But Bank of Israel and Treasury economists believe if the planned spending cuts are implemented, inflation will be down to single digits by June or July.

As in past years, the new budget is designed to reduce government costs by giving the public fewer services, while imposing new fees or increasing old ones.

In the coming year, Israelis will face higher education costs, fare increases on public transportation, higher water bills, a new tax on large cars, higher national insurance premiums and an increase in the cost of hospitalization.

The success of the new budget will depend in large measure on the extent of cooperation between the government and Histadrut, Israel’s all-embracing trade union federation.

Peres is also likely to run into trouble with right-wingers because his budget provides no funding for the eight new settlements in the administered territories, agreed to by the Likud-Labor coalition when it was formed last month.

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