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The battle over the defense budget began Wednesday when heads of the armed forces met with members of the security cabinet. The intelligence reps presented their annual overview in which "Iran persists in its desire to get the nuclear bomb, and it will achieve this goal within 3-4 years." The government ministers trembled in fear.

And so the annual show goes on, each July, with the treasury threatening to cut swathes off the defense budget. Two years ago the Israel Defense Forces was in pretty good shape; it had Saddam Hussein. Back then, Military Intelligence research division chief Amos Gilad said, with full authority, that Saddam would send chemical bombs raining down on Israel "when he is pushed against the wall." And who would dare to propose budget cuts with such a real chemical threat - which never materialized, and never really was.

Then last year a tragedy occured. Iraq was vanquished, Saddam was overthrown, the U.S. settled in the heart of the Arab world - and the whole eastern front myth fell to pieces. The IDF took counsel. Egypt and Jordan were at peace, and Syria's army was rusty. So what could the threat be? They thought and pondered, and then they knew: Iran's Shihab 3 rockets were pointing at the very heart of Tel Aviv. The press was peppered with terrifying pictures of Tehran's dreadful weaponry - and the cutbacks were averted.

This year the problem has got worse. Everyone has already internalized the breakdown of the eastern front, and the absence of a conventional threat against Israel. So they turned atomic, care of distant Iran.

The big problem is the need to cut NIS 6 billion from the government's budget for 2005, but in the present climate, there seems little hope of trimming any more from welfare payments, education, health or local government. So the treasury wants to cut NIS 2 billion from defense spending, while the IDF wants an addition of NIS 1 billion.

This appears to be a difference of NIS 3 billion, but now the "flexible basic law" comes into play. While the treasury wants the cut based on a current baseline of NIS 34 billion, the IDF refers to an addition calculated using a baseline of NIS 35.6 billion. So the difference lies between 36.6 and 32 billion - an enormous gap of NIS 4.6 billion.

Now the army says that it is indeed cutting back. It points to job losses of some 3,500 career army staffers and 2,200 civilian workers in 2004-2006. A senior army source says the IDF is prepared to lower the budget, but that it must be done gradually over several years, leaving the army fitter and leaner in, say, three to four years' time. The same source says the IDF is prepared to implement an efficiency program that will make enormous savings, but that the treasury must help out "in the meantime" during the transition period.

At the end of the day, the budget cut will not be determined by the real parameters of our strategic situation, but according to the political clout of Finance Minister Benjamin Netanyahu against Defense Minister Shaul Mofaz, and the courage of the prime minister. Mofaz recently expressed great concern over our social situation in light of the worsening poverty. So now the defense minister has a golden opportunity to improve the situation by spending less on defense and more on society.