Israel’s Central Banker Sounds Alarm as Budget Deadline Looms

Bank of Israel Governor Amir Yaron warned the country’s feuding politicians that failing to pass a budget soon might paralyze parts of the economy, as wrangling among factions risks collapsing the government next week.

The absence of a spending blueprint “is a further and unnecessary brake on our ability to deal with the economic crisis,” Yaron said on Israel’s army radio Thursday. “The lack of a budget for a second year straight could paralyze many activities and it’s really the last thing the economy needs.”

Israel is operating on an extension of last year’s spending plan after members of the ruling coalition were unable to bridge key differences.

Prime Minister Benjamin Netanyahu balked at honoring an agreement to pass a budget through 2021. The tussle is more about politics than economics. A two-year plan would deny the premier the ability to bring down the government over next year’s budget before Defense Minister Benny Gantz is set to take power under their power-sharing agreement.

If a budget isn’t approved by Dec. 23, the country could be tipped into its fourth costly election in two years.

The Finance Ministry’s Accountant General Yali Rothenberg has warned in a letter to government ministries that without adjustments and the passage of a new budget, “this situation will require further cutting of government expenditures.”

Finance Minister Israel Katz on Thursday called for a 2020 blueprint to be passed on Sunday, with discussions at a later date for next year’s plan.

©2020 Bloomberg L.P.

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