.4-.

Cabinet Tries
To Reach Fiscal
Policy Accord

Jerusalem (JTA) — The
Cabinet convened last Mon-
day in an all-out attempt to
reach agreement on a budget
for the next fiscal year. The
session was preceded by a
meeting of the four-member
Ministerial Economic Com-
mittee consisting of Prime
Minister Yitzhak Shamir,
Vice Prime Minister and
Foreign Minister Shimon
Peres, Finance Minister
Moshe Nissim and Economic
Coordination Minister Gad
Yaacobi.
The Minister and their
aides reportedly grappled
with the Defense Ministry's
adamant opposition to any
further cuts in the defense
budget, an issue which will
now be addressed by the full
Cabinet.
Nissim was said to have
backed off from his original
180 million Shekel cut in
defense expenditures but in-
sists on a minimum reduction
of 80 million Shekels. Defense
Minister Yitzhak Rabin re-
mains firmly opposed.
Shamir and Peres are also op-
posed to significant defense
cuts but Shamir conceded
last week that some cuts were
unavoidable.
Another battle shaping up
is over the education budget.
Education Minister Yitzhak
Navon said the proposed cuts
were too drastic and he would
vote against them. Navon has
the backing of elementary
school teachers who have
threatened a strike if the cuts
are made.
Peres held talks with trade
union leaders and in-
dustrialists before the
Cabinet convened. He was
hoping to put together a
package of wage and price
restraints to enable the
Treasury to proceed with its
planned tax reforms.
Treasury sources said that
they still hoped to cut the top
income tax brackets from the
present 60 percent to under
50 percent. But the Treasury
has apparently waived its am-
bitious plans to eliminate the
myriad of exemptions and
loopholes in the tax code, in
face of strenuous opposition
from Histadrut.
The labor federation seems
neutral toward urgings by the
Manufacturers Association
for a devaluation of the
Shekel which would stimulate
, exports. The Cabinet was ex-
pected to decide that issue in
face of growing public con-
- cern. Rumors of devaluation
triggered a buying spree in
the Thl Aviv Stock Exchange.
The main argument for de-
valuation is the growing gap
in Israel's trade balance and
a desire to maintain economic
stability and Israel's greatly
improved foreign currency
reserves which amount cur-
rently to .about $4 billion.

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