Israeli Cabinet Approves Wide-ranging Budget Cuts

Steinitz cuts Defense Ministry budget by NIS 100 million after discovering that Ehud Barak would vote against the latest reforms.

The cabinet on Monday approved an economic package of tax hikes and wide-ranging cuts in almost every government ministry - including a surprise cut of NIS 100 million to the defense budget, which triggered umbrage in military circles.

Ministers voted 20-9 in favor of the Finance Ministry recommendations, which will come before the Knesset for a vote in a special summer session on Monday.

"This is a responsible step that will protect the Israeli economy and citizens' jobs," Prime Minister Benjamin Netanyahu said after the vote. "Even after the approval of this package, the weaker sectors and the middle class are left with more money in their pockets."

The treasury says the flat, across-the-board cuts of five percent in most ministries' 2012 budgets are necessary to free up funds to cover new expenses. These include steps to stop the entry of migrants across the Egyptian border, to upgrade the country's firefighting system and to improve civic defense preparedness in times of emergency.

The economic plan also includes legislation to combat tax evasion.

Meanwhile, defense officials took umbrage on Monday at what one called the "childish and ridiculous behavior" exhibited by Finance Minister Yuval Steinitz in cutting the NIS 100 million from the approximately NIS 60 billion defense budget. They said the last-minute change was a form of revenge, apparently concocted with Netanyahu, for Defense Minister Ehud Barak's decision to lead his four-member Atzmaut faction in a vote against the economic program.

The cut was made after Barak left the cabinet meeting, a few minutes before the vote took place. Barak was rushing to take part in a going-away party for Home Front Defense Minister Matan Vilnai, who is due to be appointed Israel's ambassador to China and had left the meeting earlier. Barak registered his vote by leaving a note with the cabinet secretary.

Barak's bureau did not find out about the extra line added to the economic program until later, when journalists started asking for comment.

"This is childish behavior on Steinitz's part that 'punishes' state security, not the defense minister personally," one Defense Ministry official said. "This cut wasn't even discussed by the ministers. Steinitz added it in a few minutes, as personal vengeance against Barak."

Until Monday's surprise, the defense budget was one of the few that had largely escaped the cuts, along with those of the education, social welfare and immigrant absorption ministries. A relatively small NIS 18 million cut to the defense budget was already planned.

The Prime Minister's Office later announced that some of the NIS 100 million would go toward the Home Front Command and toward protecting Barzilai Medical Center in Ashkelon from rocket attack by reinforcing the building. No specific shekel amounts were given.

Barak had proposed a different macroeconomic plan, based on the principle that during periods of growth the government should not interfere with the momentum of the free market, a principle which he said would help draw down debt and accumulate reserves for a rainy day.

"The problem is that this simple principle is not accepted by the treasury and a large proportion of the government ministries, which is liable to lead to a terrible mistake," Barak said. "As a result, the government is worsening the recession that we're facing instead of improving the situation. That's why it won't meet the revenue collection targets it's setting for itself now."

Before the cabinet meeting, Steinitz defended the plan, saying the "economic slowdown, which is also expected next year, bears an influence on state revenues, and we must keep a reasonable deficit.

"We must understand that despite Israel's fairly good situation, the threat is large," the finance minister added.

Over the weekend, Steinitz reached agreement with the leader of Yisrael Beiteinu, Foreign Minister Avigdor Lieberman, ensuring the party's support for the proposals as long as they do not apply in full to the Immigrant Absorption Ministry.