2009 Budget Deadlocked by Olmert Investigations

The prime minister's office already has postponed two budget meetings with Finance Minister Roni Bar-On.

The flurry of investigations into Prime Minister Ehud Olmert are paralyzing preparations for the 2009 budget, say treasury officials, warning that the budget probably won't be ready before next year.

The prime minister's office already has postponed two budget meetings with Finance Minister Roni Bar-On and the treasury budgets director, in which Olmert was supposed to participate. The first meeting was about fiscal goals and the state of the economy, and had been scheduled for Monday last week.

The second was about the budget composition and structural reforms, and had been scheduled for today. Olmert's office also canceled informal working discussions about the budget with the treasury chiefs, as meanwhile, investigators investigate allegations of corruption.

Also, the sheer weakness of the government, and the possibility of early elections, have raised doubt in treasury minds as to whether the coalition can push the budget through the Knesset before year-end. Nor are the treasury people optimistic that the cabinet will hold its first 2009 budget debate on June 10, as scheduled.

Treasury officials haven't been this pessimistic about getting the budget through on time for years. They do say that Olmert will dedicate time tomorrow to economic matters, but the prime minister is supposed to take off for the U.S. tomorrow and his agenda is crammed.

The procedure is for the cabinet to approve the budget proposal, after which it has to fight its way through the Knesset. If the 2009 budget doesn't pass the hurdles by the end of December, Israel will begin the year without an approved budget in place.

Of course, this has happened before. In that eventuality, the ministries will simply function based on the 2008 budget - without the slightest deviation. No new plans may be approved, for example. Government spending won't be able to adjust for the natural increase of the population in 2008, point out the treasury chiefs, or to take various spending promises and reforms into account.

Last week the Budgets Department at the treasury held two meetings on the 2009 budget, the first on its size and necessary cuts, and the second on structural reforms planned for 2009. The treasury officials claim that to adjust the 2009 budget to population growth, inflation expectations and other elements, NIS 12 billion has to be added over this year. That figure includes NIS 3 billion more for education, NIS 4 billion for security, and NIS 1.5 billion for healthcare. And that means that NIS 7 billion has to be cut elsewhere in the budget so total government spending doesn't break the bank next year, say the treasury chiefs.

Budget talks are typically difficult, as coalition factions maneuver to obtain the most they can for their constituencies. Finalizing the budget takes much effort and finesse, and convincing the coalition members and Knesset to support sweeping budget cuts in all areas but the above-mentioned will take leadership. Olmert reportedly promised the treasury officials months ago that he'd tackle the budget negotiations by Passover, but it didn't happen.