Yair Lapid, Israel's 'Golden Boy,' Crashes to Earth in Austerity Push

Middle Class Backers Furious Over Harsh Budget Cuts


By Reuters

Published May 15, 2013.
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Instead, he unveiled an across-the-board 1.5 percentage point increase in income tax, a one percentage point increase in sales taxes and a sharp reduction in child benefit.

Lapid says the pain is shared out equally, noting that he also upped corporate taxes by 1.5 percentage points and confronted one of the state’s sacred cows – the defence budget, which faces a three billion shekel cut.

STREET ANGER

To add insult to injury to his fans, Lapid also struck a swift deal with the main union. Rather than go to war with the labour bosses, as he had promised, he sought instead to head off the threat of a strike and agreed to delay measures that he had promised would bring lower prices, such as privatising ports.

“Swindler, liar, crook. In the next election, ‘Yesh Atid’ has no future,” a man named Menachem Yankowitz wrote on Lapid’s Facebook page, drawing 45 likes.

Looking to revive the spirit of 2011, when hundreds of thousands of Israelis protested against the high cost of living, activists called for a revival of the street demonstrations last weekend.

“He has just screwed all of us over and made all of our lives a lot harder and a lot worse,” said Dara Libiberski, 23, a protester in Tel Aviv on Saturday.

“I can’t afford for my life to get more expensive.”

Only a few thousand turned out for the march, but more protests have been called for this coming Saturday and Lapid will be in political trouble should they start to gain traction.

Ironically, Israel’s fiscal difficulties arise in part from the concessions Netanyahu made to defuse the unprecedented 2011 street movement – such as expanding free pre-school care for toddlers and raising some public sector pay.

Indeed, alongside the belt-tightening, actual government spending will rise more than five percent year-on-year in 2014 to pay for an array of projects – well above inflation.

“People forget that for the last year or two, Netanyahu has had an open cheque book,” said Jonathan Katz, macro strategist for HSBC in Tel Aviv. He added that while Lapid had angered his voters, he had also helped restore Israel’s market credibility.

In a sign of that, the risk premium for Israeli 10-year bonds compared to U.S. Treasuries had fallen to under 160 basis points from just over 200 before the budget was announced.

Lapid’s own poll ratings have also sunk. One survey said that only 47 percent of Yesh Atid voters planned to back him in future, while 28 percent said they would not. Some 25 percent were undecided.

But Hazan, from Hebrew University, predicted that if Lapid started to stand up to the vested interests, as he promised in weekend television interviews, and if the economy turned round, then he could suddenly find himself in a strong position.

“In two years time he will start campaigning to be prime minister or else his party will be in the single digits … and will begin to unravel,” he said.


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