Prime Minister Benjamin Netanyahu and Finance Minister Yair Lapid may have come to a final agreement on next year’s state budget on the eve of the Rosh Hashanah holiday, but the conflict is far from over – the defense establishment is stepping up its opposition to the current plan.
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On Wednesday, shortly before the holiday began, Netanyahu and Lapid agreed to a budgetary framework intended to solve the dispute between the two and pave the way for the cabinet and Knesset to approve next year’s budget.
Yet several minutes after they made their announcement, a “senior defense source” said the defense establishment did not accept that solution, which the source termed an “Isra-bluff,” adding, “We’ll be forced to halt the army within the first few months of 2015.”
Under the compromise, the defense budget for 2015 would increase by 6 billion shekels ($1.6 billion) – and not the 11 billion the defense establishment is demanding – while the state will give the Israel Defense Forces another 7 billion to 8 billion shekels to cover expenses from Operation Defensive Edge. The budget deficit will be set at 3.4% of GDP, significantly above the original 2.5% target. They also agreed that there would be no budget cuts or tax increases, and that no tax exemptions would be canceled.
Their final agreement is very similar to the draft agreement they presented nine days ago, so it’s unclear why their meeting last Sunday – which had been intended to finalize the deal – failed to produce results.
Under Lapid and Netanyahu’s agreement, the total defense budget for 2015 will come out to 65 billion shekels, and not the 70 billion the defense establishment is demanding.
It’s also not clear whether Lapid and Netanyahu will instruct Finance Ministry staff to draft the budget framework into a bill based on the current recommendations, or whether they’ll try to address the conflict with the defense establishment first.
Past experience has shown that Netanyahu generally yields to the defense establishment in the case of budget disputes. It’s not clear whether defense officials have received any secret promises, but past experience would indicate that the defense establishment is likely to receive the full sum it is demanding – if not more – and that Netanyahu will ultimately actively promote this.
Netanyahu is due to spend the next week at United Nations headquarters in New York, so a solution to the defense budget conflict is likely to wait until his return.
By law, the Knesset must receive a draft of a budget bill by November 1. It has until March 31 to approve the budget; if it does not, the Knesset is disbanded and new elections are called.
Most or all of the additional 6 billion shekels is likely to become part of the budget framework, meaning it will become part of the defense establishment’s base budget in future years.
The government will be covering Operation Protective Edge expenses out of its budgetary reserves.