This Ministry Will Soon Self-destruct

The Finance Ministry seriously mismanaged its budget crisis, but now, by focusing on personal issues rather than public ones, it is allowing its enemies the upper hand.

The recently demoted Eyal Epstein was the man in charge of preparing the 2011-2012 budgets in the Treasury’s budget division, at that time headed by Udi Nissan. Epstein was, therefore, at the focus of the debate regarding responsibility for the error in that budget, an inflated estimate of tax revenues. Epstein was also supposed to be in charge of preparing the 2013 and 2014 budgets, under current division head Gal Hershkovitz. Those two budgets are supposed to be approved together under a tight time crunch, as soon as the new government is sworn in. The 2013 budget is slated to contain massive cuts amounting to NIS 14 billion, which will make its passing one of the tightest and most difficult ever.

The need for a highly professional economist who is familiar with all the ins and outs of budgetary details, and who knows how to steer its passage through the Knesset, is more essential than ever in light of the impending ordeal. It is generally agreed that Epstein is the best man for the job. He is very experienced, and is highly regarded at both the Prime Minister’s Office and at the Bank of Israel. He is the only senior official at the Treasury’s budget division who has, in practice, guided at least one budget through the legislative process.

Given these facts, his public demotion on prime-time TV was met with shock. This was an unprecedented move, made graver by its unfortunate timing – just before passing of the budget. Senior government officials thought the move might put the passing of the budget bill at risk. They said that such a move, at such a time, was irresponsible. Given that Epstein was intending to resign anyway after the budgets were approved, the urgency and publicity of his dismissal were unacceptable, they said.

The on-air nature of his dismissal, has once again raised concerns over the powerful agents trying to weaken the Treasury, and particularly its budget division. According to some assessments, the Prime Minister’s Office itself was behind the move, as part of other moves instigated by the office, such as establishing a committee to look into the balance of power between government departments (the governance committee). This move is considered by officials at the Treasury and Justice Ministry as an attempt to weaken gatekeepers within the government. Needless to say, the Prime Minister’s Office strongly denies any such hidden intention.

Other assessments were that Finance Minister Yuval Steinitz and the director-general of his ministry, Doron Cohen, stood behind Epstein’s dismissal. These theories call the event part of a government power struggle, born from opposition to the formation of power centers within the government, with public servants wielding too much independence. These allegations were also denied, with the claim that the authority to make appointments in the division lies solely with its head, Gal Hershkovitz. This brings up the common view that there is bad blood between Hershkovitz and his deputy, rooted in the public debate concerning the Treasury’s responsibility for the two largest macro-economic errors of the last two years. These were overstepping the target deficit for 2012, and the accumulation of massive expenditures, which are the backdrop for the approaching 2013 budget. Hershkovitz was not yet at the division when the erroneous decisions regarding the 2012 and 2013 budgets were made (Epstein, however, was there). But Epstein was the first to detect the mistakes. His calls to correct them went unheeded for a long time.

The bad blood between the two finally led to the decision to remove Epstein, at the worst possible time for the public. Just as the new government is to be cobbled together, facing an epic struggle over approval of the new budget, the most senior Treasury official familiar with the workings of the budget has been removed from the equation.

And when the extent of the deficit became public knowledge, there was a massive public outcry. The Treasury seriously mismanaged this crisis, since the numbers were known a year ago. Now, two weeks later, there is a new storm brewing over irrelevant and personal issues at the upper echelons of the Ministry getting in the way of public interest.

If the doomsayers at the Treasury are correct in saying that certain government circles are trying to weaken the gatekeepers at the Finance and Justice Ministries, one can only surmise that the goal is now being achieved by the Finance Ministry itself, which is engaged in self-destructive behavior, pursuing personal interests over public ones. At this rate, its external enemies will soon be left idle.

Reuters