Defense establishment seeks NIS 20b. budget hike

Government warns increase will come at expense of education, welfare; Lapid says money needed to secure the south

Yifa Yaakov is a breaking news editor at The Times of Israel.

Prime Minister Benjamin Netanyahu (C ), Defense Minister Moshe Ya'alon (R ), and IDF Chief of Staff Benny Gantz (L) visit the Hatzor Israeli Air Force base on August 27, 2014. (photo credit: Haim Zach/GPO/Flash90)
Prime Minister Benjamin Netanyahu (C ), Defense Minister Moshe Ya'alon (R ), and IDF Chief of Staff Benny Gantz (L) visit the Hatzor Israeli Air Force base on August 27, 2014. (photo credit: Haim Zach/GPO/Flash90)

The defense establishment on Wednesday asked the government for a budget increase of NIS 20 billion (some $5.6 billion) through 2015, stating that NIS 9 billion were required to cover the costs of July and August’s Operation Protective Edge, while an additional NIS 11 billion were needed for its operational deployments in 2015.

The country’s top defense brass, including Defense Minister Moshe Ya’alon, IDF Chief of Staff Benny Gantz and Defense Ministry Director General Dan Harel, presented its demands to the security cabinet during its Wednesday meeting, the first since Operation Protective Edge ended with an open-ended truce a week ago, stating that in order to meet the objectives the government has set for them, including ensuring the security of southern Israel, the defense forces would require more funds.

Ahead of government discussions on the 2015 budget which are set to be held next Thursday, the Finance Ministry warned that if approved, the NIS 20 billion increase would have to be drawn from other budgets, such as the education, infrastructure, health and welfare budgets.

Last week, Bank of Israel Governor Karnit Flug urged cabinet ministers not to attempt to solve the budget shortfall through deficit spending, warning that this could hurt an already slowing economy.

Prime Minister Benjamin Netanyahu is set to discuss the demands in separate meetings with Finance Minister Yair Lapid and Defense Minister Ya’alon in the coming days, with the prime minister expected to make a decision on the matter by the end of next week.

On Thursday, Lapid, despite comments from officials in his ministry complaining that the defense increase was exaggerated, said the additional funds were necessary to ensure the security of southern Israel and combat the threat of mortars and terror tunnels.

“Discussions are being held on how much [money] the defense establishment needs, and how much the State of Israel can give,” Lapid told Israel Radio early Thursday morning, admitting that he himself believed the defense budget should be increased.

Finance Minister Yair Lapid speaks to reporters at the Government Press Office in Jerusalem on Sunday, August 31, 2014. (photo credit: Yonatan Sindel/Flash90)
Finance Minister Yair Lapid speaks to reporters at the Government Press Office in Jerusalem on Sunday, August 31, 2014. (photo credit: Yonatan Sindel/Flash90)

“I won’t go into numbers here, [but] the defense budget has to be increased. We need a solution to the tunnels, we need a solution to the mortars. The children of Nahal Oz and Sderot (in the Gaza periphery) must not go to sleep at night with the fear that a mortar will fall on them or that a terrorist will jump out of some tunnel. We are totally responsible … for the residents of the south and the Gaza periphery. These are the facts, and that is why we will need more money for defense-related projects on a regular basis.”

Earlier this week, the cabinet approved a proposal for slashing ministry budgets in order to help pay for the recent Gaza operation, the direct cost of which was estimated at NIS 9 billion (about $2.5 billion) on Tuesday. The cabinet voted on Sunday to slash the budgets of all ministries except defense by 2 percent to make up some of the money, while Lapid has called for heavier borrowing instead of tax raises to cover the rest.

The Education Ministry, which faces the deepest cuts, is set to lose some NIS 695 million ($195 million), while the Transportation Ministry will find its budget trimmed by NIS 247 million ($69 million).

Among the other ministries facing budget reductions: the Social Affairs Ministry would lose NIS 63 million ($17.5 million), the Economy Ministry NIS 54 million ($15.1 million), the Public Security Ministry NIS 51 million ($14.2 million), and the Health Ministry NIS 50 million ($14 million).

The money saved from the cuts is to be used to cover military expenses incurred during 50 days of fighting in Operation Protective Edge, and to help finance economic aid packages for the southern communities that suffered severe losses as rocket fire from Gaza drove away tourists, kept consumers off the streets, and crippled productivity.

On Thursday Lapid defended the proposal, saying the cuts would be almost imperceptible in light of the unprecedented increases in each ministry’s budget. The budgets, he said, would still be bigger than they have been in previous years.

“Look, I think the issue of the cuts has to be explained, because the public must not have understood it correctly,” Lapid said. “These are all budgets that have increased, and with good reason, because Israel needs better education, better health and better welfare services … I wish we could get them more and more, because these are areas that are central to our lives. I’m just trying to provide some perspective: [the cuts] amount to 2 percent of the enlarged budgets, and that’s something we can handle.”

The question of how Israel’s fiscal policy should move forward has sparked debate as Israel looks for a way to cover increased defense spending after Operation Protective Edge. Politicians and officials have been sparring over how to cover the NIS 9 billion ($2.5 billion) cost of the 50-day military campaign against the Hamas terror group.

Preliminary 2015 budget proposals allowed for a deficit cap of 2.5% of GDP. However, after the unexpected increase in defense spending for the operation, both sides agree that this number is no longer realistic.

Lapid, who does not want to increase taxes, has proposed increasing the deficit cap to 3.5% of GDP in 2015, saying that higher deficits were preferable to budget cuts and tax increases — though he indicated in his Thursday interview that he was warming to the idea of budget cuts.

On Wednesday, amid mounting criticism of his fiscal plan for the 2015 budget, he threatened to pull out of the coalition if taxes were raised to cover the costs of Operation Protective Edge.

“I am the finance minister, I know the numbers, there is no reason or need to go once again and take money from the pockets of Israeli citizens,” he said.

Stuart Winer and Tamar Pileggi contributed to this report.

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