IDF Chief, Finance Minister in Secret Talks Over Defense Budget

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IDF Chief of Staff Lt. Gen. Gadi Eisenkot at a ceremony on Mount Herzl, Jerusalem, April 19, 2015.
IDF Chief of Staff Lt. Gen. Gadi Eisenkot at a ceremony on Mount Herzl, Jerusalem, April 19, 2015. Credit: Emil Salman

Finance Minister Moshe Kahlon and Chief of IDF General Staff Lt. Gen. Gadi Eisenkot have met in secret in recent days to reach understandings on the structure of the defense budget, one that will take into account the findings of the Locker Committee to reduce defense outlays, which were published in July.

The meetings over the past several days comprise the second round of talks the two have held in the past few months, with the approval of Defense Minister Moshe Ya’alon. Among the issues the two have discussed is the reduction of compulsory service for men by two more months, to 30 months. But reaching any kind of overall agreement is conditioned on a deal to reorganize the pension framework for those who retire from the regular army, an obstacle that has yet to be overcome.

Haaretz has learned that it’s now possible that the army will back down from some of its objections to the Locker recommendations on pension reform, on condition that the new arrangements also apply to the other security services – Israel Police, Shin Bet security service and Mossad.

Finance Minister Moshe Kahlon (L) with Prime Minister Benjamin Netanyahu in the Knesset, July 27, 2015.Credit: Emil Salman

In addition to the Kahlon-Eisenkot talks, discussions are also being held by Defense Ministry director general Dan Harel, Finance Ministry director general Shai Babad, and budgets department chief Amir Levi. Defense sources told Haaretz that these talks are all taking place in a friendly atmosphere, and that despite previous spats between the treasury and Defense Ministry, “A real effort is being made to reach an agreement and not a hostile clash.” Another source said, “Thanks to this new approach, the opportunity for significant progress is in reach.”

The Locker Committee report, written by a panel headed by retired Maj. Gen. Yohanan Locker, had elicited vehement opposition from Ya’alon and senior Israel Defense Forces officials when it was released. Its far-reaching recommendations including capping the defense budget at 59 billion shekels ($15.2 billion), which would require the IDF to implement efficiency measures; the dismissal of 4,000 regular army officers; cutting men’s compulsory service to 26 months and merging the Ground Forces Command and the Technology and Logistics Branch in the General Staff.

But the recommendation that caused the greatest furor was the proposal to change the army’s pension framework. The committee proposed that most of the retirees still receiving budgetary pensions (i.e., those who were drafted before 2003) would no longer get “bridging pensions” from when they retired until age 67, and instead would receive a demobilization grant that would be significantly lower. The only exceptions would be those who served in combat assignments up to the level of battalion commander or the equivalent (such as submarine or missile-boat commanders in the navy, or squadron commanders in the air force). The IDF said this would constitute a grave deterioration of employment conditions and reduce motivation of staff officers and those involved in combat support assignments.

Now it seems the army’s position is softening somewhat, but it is demanding that a committee be formed to discuss how the new arrangements will be imposed on all the security services at once. The treasury wants to make do with a promise that after the new framework is introduced in the army, the other security services will join. There also remains a dispute over which officers will continue to enjoy the bridging pension.

Sources familiar with the contacts said that without a final agreement on the pension issue, none of the other understandings being reached will be implemented. They said progress has been made on issues other than the shortening of compulsory service; for example, the security establishment is considering the recommendation to unite the Technology and Logistics Branch with the Ground Forces Command. The Locker committee believed that this move could save money, but the army objected when the report was released. The two sides are also close to agreeing to implement reforms in the Defense Ministry’s Rehabilitation Branch that will reduce the number of those receiving generous state benefits in the future.

The talks have been kept secret until now, although Kahlon had hinted at them a few days ago when he said that he expected to “achieve reforms that we never dreamed of” in the defense budget.

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