07.24.12, 15:31–The Knesset plenum on Monday passed the preliminary reading of a bill to raise the deficit target from 1.5% to 3% next year. After the vote, Finance Minister Yuval Steinitz said that despite the doubling of the deficit target, the government will have no choice but to raise taxes in 2012.

While doubling the deficit target will allow the government to increase the 2013 budget by NIS 15 billion (about $3.7B), this still would not cover the large deficit that is expected due to a drop in tax collections, which resulted in a loss of NIS 2.8 billion ($700M) in tax revenues.

“There is a global economic slowdown. Europe is collapsing. The recovery is slower than we had anticipated. We are a part of the world and it affects us as well,” Steinitz said. “Therefore, we’ve decided to adjust the deficit target to the difficult reality and set it at 3% – because not one economic expert thought it should remain at 1.5%.”

The minister said he had consulted with bank governors and finance ministers from all over the world before setting the deficit target at 3%, which he said “is also the new deficit target in Europe…Read More>>

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