Budget 2007 / Politics Ahead of Economy

Yesterday is a day Abraham Hirchson will never forget. His standing as finance minister was in the balance, his decades-long friendship with Ehud Olmert nearly collapsed, and the stability of the Israeli economy was also in question.

It began early in the morning, when Olmert got cold feet. His advisers drove him crazy with nightmare scenarios about what would await him in the cabinet should he dare to submit the budget as is. They told him the Labor Party would exploit the budget cutbacks to turn him into Public Enemy Number One (as it did to Benjamin Netanyahu, perish the thought), while Shas would turn him into the scourge of children and the elderly.

Olmert though likewise. The political fallout drove him nuts. Therefore, throughout the budget discussions, he expressed worries, reservations and an evident unwillingness to carry out the necessary cuts. He did eventually agree, but yesterday morning, when he heard that Labor and Shas were threatening to vote against the budget, he had a last-minute change of heart and ordered the Finance Ministry to stop printing the budget booklets, so that he could make fundamental changes: canceling cutbacks and increasing total expenditures and the deficit.

The printing presses were halted after 100 booklets. Hirchson and senior treasury officials went into shock. How is it possible that after all the hours they spent with Olmert and his staff, Olmert is betraying them at crunch time? How will it look for a finance minister to call a press conference for 2 P.M. only to cancel it because he has nothing to show the reporters, and nothing to distribute to ministers?

Immediately after the printing presses stopped, Olmert convened everyone urgently: senior officials from both the treasury and his own office. Olmert shouted and accused the treasury of introducing harsh cutbacks, which go over poorly with the public, and said that they need to come out. He said that they must understand his delicate political position, and ordered the budget division to change the budget - to find other funding sources and raise the expenditure ceiling.

Hirchson realized that he could not accept this. He realized that if the budget book was opened up in order to add even a single billion, the signal to the economy would be clear. Everyone would realize that they are dealing with a weak prime minister who is afraid of his coalition partners and cannot stand the heat. Everyone would also realize that the finance minister is not independent - that he cannot stand up to the prime minister, because "he's a friend," because he "appointed him." And the outcome would be that everyone (opposition, coalition, ministers and MKs) would swoop down on the budget and the claims would be sky high - and from there, the distance is short to a budgetary collapse and the government's downfall.

The crucial meeting was set for 4:30 P.M., with Olmert and Hirchson present. It was clear to the prime minister's staff that there was no other budget. If Olmert wanted a "better" budget, he would have to do the work alone, with his people - and that, of course, was impossible. So Olmert capitulated, calmed down and approved the original budget - with one slight change: no tuition hikes for university students.

Olmert emerged bruised from this battle. He was shown to be weak, hysterical, incapable of withstanding pressure, guided by internal politics rather than the good of the economy. Luckily, he came to his senses at the last moment.