Israeli Finance Minister Yuval Steinitz, fresh from a record-setting sale of Israeli bonds to investors in Florida, said on Monday that balancing the government budget will require “moderate but still significant” cuts to the defense sector.
In an exclusive interview with Reuters, Steinitz, a leading member of the weakened Likud party of hawkish Prime Minister Benjamin Netanyahu, also said there are no plans to further raise taxes in order to hit a deficit target of 3 percent of economic output.
Parliamentary elections last week returned Likud to the top spot in the 120-member assembly, albeit with 11 fewer seats.
One area “that we will have to make some moderate but still significant cuts is the defense budget, I assume. It is not easy but we did it in the past,” Steinitz said during a stopover in New York before flying home.
Israel spends roughly 20 percent of its budget on defense. It has to find a way to close a 14-billion-shekel deficit.
Steinitz stuck with the 3.5 percent gross domestic product growth target this year, rising from 3.3 percent in 2012. He added that it would not be a surprise if economic growth touches 4 percent in 2014.
The debt-to-GDP ratio is expected to decline to somewhere in the 73-percent range, down from 74.1 percent in 2011, he said.
One main reason for expecting an economic rebound is the return of cheaper natural gas to power Israel’s industry as the Tamar natural gas field off the Mediterranean coast comes online in April. Egypt stopped supplying cheap gas in early 2012.
Steinitz took the positive economic message to Boca Raton, Florida, on Sunday where he spoke at a fundraising dinner for Israel Bonds. The event pulled in a single-evening record $230 million in sales to retail investors and Israel supporters, he said.
Separately, Israel’s government sold $2 billion worth of 10-year and 30-year U.S. dollar-denominated debt on Monday, albeit at moderate discounts.
ELECTION COALITION CALCULUS
Steinitz, a former philosophy professor, was upbeat about attracting potential coalition partners and said he expects to play a role in the next government.