Israel budget deficit twice as high as projected

Israel's finance ministry has announced a 2012 budget deficit nearly twice the government's target, potentially posing a challenge to Prime Minister Benjamin Netanyahu ahead of elections next week. The announcement, made late on Sunday, put the deficit at 39 billion shekels ($10.5 billion/8.0 billion euros), nearly double the 20 billion shekel target set by the government. "It is already clear now that the first political bombshell that (the next government) will have to defuse will be the 2013 state budget, which will be required to cover a higher deficit than expected and could lead to a coalition crisis," said the top-selling Yediot Aharonot. But Netanyahu played down the announcement, reportedly telling a campaign meeting for his rightwing Likud party that the figure as a percentage of GDP was not significantly larger than expected. "The figures were more or less expected," local media quoted him as saying. "We were waiting for a deficit of 3.9 percent and in the end it was 4.2 percent," he added. "Our deficit is less than that of the Americans and the Europeans. I don't think that this will have consequences for Israeli citizens." But the figures, a final revision of numbers released in 2012, were seized on by Netanyahu's political opponents, including Shelly Yachimovich of the centre-left Labour party -- Likud's strongest rival. "Netanyahu is leading the Israeli economy to total collapse," Yachimovich said. Her Labour party is expected to be the second biggest party in the next Knesset, and has focused its platform on the country's socio-economic problems. Naftali Bennett, who is expected to lead his Jewish Home faction to an almost unprecedented showing in the elections, also seized on the numbers to attack Likud. "Even though they knew that their revenues were decreasing, the government continued to distribute money," he said. "We pay taxes and we deserve a government that doesn't behave in an extravagant manner." Netanyahu has touted his government's economic performance during the campaign, arguing that he helped safely steer the country through the turbulent world financial crisis. But he failed to win over many of the hundreds of thousands of Israelis who took to the streets in 2011 to protest the cost of living and increasing income disparity. And the larger-than-projected deficit means the next government, which Netanyahu is widely expected to lead, will have to take painful austerity measures that are expected to be unpopular.