Budget row threatens to topple Netanyahu’s government

Budget row threatens to topple Netanyahu’s government

Shas and United Torah Judaism tell PM they will pull the plug on coalition if he reneges on budget allocations they were promised

Shas leader MK Aryeh Deri (right) speaks with United Torah Judaism leader MK Yaakov Litzman (left) during the opening session of the 20th Knesset, March 31, 2015. (Nati Shohat/Flash90)
Shas leader MK Aryeh Deri (right) speaks with United Torah Judaism leader MK Yaakov Litzman (left) during the opening session of the 20th Knesset, March 31, 2015. (Nati Shohat/Flash90)

Two ultra-Orthodox Jewish parties have warned they would bring down the government over the new state budget, after Prime Minister Benjamin Netanyahu attempted to walk back post-election promises he made regarding funding for their electorates.

The prime minister’s fragile coalition rests on a wafer thin 61-59 majority. If any party were to leave the coalition, it would effectively topple the government.

Sunday’s anticipated government discussion on the budget has been delayed due to the row, the Israeli business paper Globes reported.

Shas and United Torah Judaism both told the prime minister they would quit the coalition if he backtracked in the 2015 budget on NIS 1 billion ($270 million) worth of allowances for seminary students and on the so-called zero VAT law, which would eliminate the value-added tax on essential food items.

Despite a windfall of NIS 14-16 billion ($3.7-$4.3 billion) to allocate the upcoming year, Netanyahu has to tiptoe around Election Day commitments he made to his coalition partners and a Defense Ministry demanding substantial increases.

Last Wednesday and Thursday, Netanyahu told coalition faction leaders that he intends to renege on some party-specific agreements he made, because they may lead to a decrease in the social and defense budgets and ultimately harm the general public.

Those agreements, signed by Netanyahu as coalition talks entered the eleventh hour, came at a cost of NIS 9 billion ($2.4 billion).

They include an NIS 1 billion ($270 million) rollback of proposed cutbacks to allowances for yeshiva students, and personal budgets of NIS 20 million ($5.3 million) apiece to lawmakers from the Shas, UTJ and Jewish Home parties, earmarked for “religious destinations.” These allowances for MKs, earmarked for projects that they can individually choose, come to a total of NIS 420 million ($111.5 million).

In addition, Shas party head Aryeh Deri insists on the passage of the zero-VAT law, which would end value-added sales tax on basic staples and foodstuffs.

“The agreements [promised to us] must be carried out. Do not test us,” UTJ head Yaakov Litzman said last week.

“If coalition leaders want an alternative government, don’t seek an agreement with us. We will stand for what was agreed upon in full. We will oppose any changes to what was signed, and we will not back down,” Litzman said.

Those promises and others face heavy opposition from Finance Minister Moshe Kahlon, who wants to see some of those commitments repealed, in addition to a three percent across-the-board cut to all ministries. These cuts are vital if the government is to increase the defense budget but still maintain its target of a deficit of less than 3% for the coming fiscal year.

The Knesset estimates that the defense budget for 2016 will stand at NIS 59 billion ($15.7 billion), up NIS 5 billion ($1.33 billion) from the NIS 54 billion the treasury was initially prepared to allocate, but less than the NIS 62-64 billion ($16.5 – $17 billion) demanded by the defense establishment.

An initial draft of the budget is supposed to be brought before the Knesset by August 31, while a vote on the first reading is scheduled to take place on September 2. Votes on the second and third readings will take place on November 19.

Yet some analysts warn that if the row continues, sticking to those dates may prove improbable.

An unnamed Shas party official said that earlier deals signed between ultra-Orthodox parties and the prime minister were done with the full knowledge of Kahlon and therefore there is “no reason to demand… the ultra-Orthodox give up their agreements.”

That claim was denied by the Finance Ministry, which released a statement saying that “those were political agreements that [we] did not take part in.”

Senior Likud lawmakers and Kahlon, too, have their own demands to include in the budget. Kahlon wants to see an increase to soldiers’ salaries, higher pensions and higher unemployment benefits. Likud’s Gilad Erdan demanded an NIS 800 million ($212.5 million) biennial increase for Israel’s police force, while Minister of Welfare and Social Services Haim Katz wants his budget increased by NIS 3 billion ($800 million).

In case of a deadlock, the Finance Ministry is conducting negotiations with Avigdor Liberman’s Yisrael Beytenu party, numbering six lawmakers, to seek its support on the budget vote — thus giving Netanyahu some leeway if one of the coalition parties were to bolt.

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