Ehud Barak
Ehud Barak. Photo by Michal Fattal
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Defense Minister Ehud Barak spoke out harshly on Tuesday in closed meetings against Prime Minister Benjamin Netanyahu's economic policies - and the recent cabinet decisions on tax hikes and spending cuts.

"Prime Minister Netanyahu, Finance Minister Yuval Steinitz and other ministers hold an ideological macroeconomic theory that was relevant in the past and is now bankrupt," Barak said on Tuesday during internal meetings in the Defense Ministry.

"The theory, from Milton Friedman's school, cannot provide a solution for the present economic crisis. Therefore, their response to the crisis is also incorrect and will only exacerbate the problems and bring on a recession. Everything is done too late and improperly. The time has ended when the government is the problem and the free market was the solution. The opposite [is true] today - the free market is the problem and the government is the solution," said Barak.

"We are strong enough, the economy is balanced enough and we will weather the global economic crisis in a proper fashion - on the condition that we act properly. There will be a drop in the standard of living and higher taxes, but if we act correctly, we will finish the crisis better than other countries," he added.

When Steinitz told the cabinet on Monday that no one predicted the present crisis, Barak and Deputy Prime Minister Dan Meridor told Steinitz: "You didn't see it."

Barak said he asked to increase the budget deficit target a year and a half ago by 0.9% of GDP, but his view was not accepted. "Now the prime minister and finance minister have convinced the cabinet to increase the deficit in 2013 by 1.5% of GDP. We have wasted a year and a half," said Barak.

The government's job is not to interfere with the free market economy when things are going well, and lower national debt and collect reserves for worse times, Barak told the cabinet Monday. But in times of a worsening international recession, the government's first priority is to prevent the collapse of the human framework, he added. "These are people who work hard in small- and medium-sized businesses, people who are carrying the country on their backs," said Barak.