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Ex-budgets chief claims finance minister fomenting ‘atmosphere of terror’

Israel Katz refusing to allow staffers to begin drafting a state budget to avert end-of-year elections, Shaul Meridor charges in first interview since explosive resignation

Budget director Shaul Meridor attends a press conference with at the Finance Ministry office in Jerusalem, September 23, 2019. (Flash90)
Budget director Shaul Meridor attends a press conference with at the Finance Ministry office in Jerusalem, September 23, 2019. (Flash90)

In his first public interview after resigning Sunday in protest against the government’s “irresponsible” economic policies, ex-budget chief Shaul Meridor warned the government was making fateful decisions haphazardly and unprofessionally, and had imposed an “atmosphere of terror” among the professional echelon to try to stamp out criticism.

The government’s refusal to pass a coherent and orderly state budget was rooted in political calculations and deadlock, he told Channel 12 in a Tuesday interview.

“As soon as I felt I could no longer really affect policy, which was violating the consensus everywhere in the world about [state] budgets, I decided it was too much for me,” he said of his departure, which made headline news and drew concerned statements from President Reuven Rivlin and Bank of Israel Governor Amir Yaron.

Israel has been without a state budget since 2019 and will likely end 2020 without one, thanks to an ongoing fight between Likud and its Blue and White coalition partner over whether the budget should include 2021 as well. Many see the battle as a manufactured crisis designed to help Prime Minister Benjamin Netanyahu stay in power without having to make good on a rotation agreement with Blue and White leader Benny Gantz.

Former Finance Ministry budgets chief Shaul Meridor in a Channel 12 interview, September 1, 2020. (Channel 12 screen capture)

Meridor’s position as head of the Finance Ministry’s Budgets Department is one of the most vital posts in the Israeli state apparatus, responsible for drawing up each year’s state budget and, in most years, for resisting attempts by politicians to spend funds without first designating an income source to cover the expenditure.

The department is credited with the country’s longstanding fiscal responsibility that has seen its debt-to-GDP ratio drop from as high as 100% in 2003 to under 60% in 2019, among the lowest figures in the developed world.

Finance Minister Israel Katz holds a press conference at the Finance Ministry in Jerusalem on July 1, 2020. (Olivier Fitoussi/Flash90)

But that culture of responsibility had collapsed, Meridor warned this week.

“I can’t lend a hand to the poor conduct taking place in recent months, which all Israeli citizens will pay a heavy price for in the coming years,” Meridor wrote in a resignation letter to Finance Minister Israel Katz published by Hebrew-language media Sunday.

He decried a decision-making process influenced by “narrow interests” and the “blatant contempt for staff work,” alleging the ministry’s financial toolbox had been trampled on and that decades-old rules were being disregarded.

“In the last few days, more and more red lines were shattered, as were elementary rules of correct budgetary and economic policy. I have decided that I can no longer be part of the system and hand legitimacy to a series of wrong decisions, which do not consider the long-term implications and their effect on the economy and citizens’ lives,” he wrote at the time.

Katz responded to the resignation by accusing Meridor of objecting to his policies for “political reasons,” even as a report said other senior ministry officials were considering stepping down as well.

Prime Minister Benjamin Netanyahu (R) and Defense Minister Benny Gantz at the weekly cabinet meeting at the Foreign Ministry in Jerusalem on June 28, 2020. (Olivier Fitoussi/Flash90)

In his Tuesday interview, Meridor accused Katz of bullying and ignoring professional advice from within the ministry.

“You can’t have a situation that when someone in the room says something that doesn’t fit what the minister wants, the minister will start to threaten, to yell, to impose an atmosphere of terror. I’m not so affected by it, but I’m not alone in that room,” he said.

Activists protesting against Finance Minister Israel Katz, outside the Finance Ministry in Jerusalem on August 31, 2020. (Olivier Fitoussi/Flash90)

“There are 15 people in that room. What do the junior staffers think? Will they dare to open their mouths the next time they think they have something to say that the minister won’t want to hear?”

Meridor noted he’d served in the ministry for nearly two decades. “Since [the time of] Silvan Shalom [who was finance minister from 2001 to 2003] to Israel Katz, there’s never been anything like this with any minister we worked with,” he charged.

“It’s unacceptable that this is how the discussions are handled. We present professional staff work, and he’s not listening. He’s looking at his phone or suddenly says something about some other topic. A finance minister isn’t a bigger transportation minister, it’s the last gatekeeper [of the public purse]. He can’t behave that way,” Meridor said of Katz, who moved into the Treasury post in June after a decade at the Transportation Ministry.

Meridor also reiterated his accusation in his resignation letter that he’d been asked to alter budget figures and estimates to create “fictional” available funds for new spending.

“There were instances when the finance minister put a lot of pressure on the professional echelon, with me at its head, to change our assessments in order to ‘create’ money,” he accused. “I think that’s not right, and I said so in the discussions. The pressure was pretty massive, and in the end it didn’t happen because I refused. But it’s a very serious warning light.”

Left to right: Energy Minister Yuval Steinitz, then-foreign minister Israel Katz, Prime Minister Benjamin Netanyahu and Cabinet Secretary Tzachi Braverman attend the weekly cabinet meeting at the Prime Minister’s Office in Jerusalem on December 22, 2019. (Tsafrir Abayov/Pool/AFP)

Katz, he added, was refusing to allow staff work to begin on drafting a budget in time for it to pass on December 23, a fact that interviewer Keren Marciano suggested might be due to Netanyahu’s purported plans to call early elections on that date.

According to the coalition agreement between Likud and Blue and White, Netanyahu must hand power to Gantz by November 2021, or earlier should the government collapse. However, a loophole would allow Netanyahu to stay in power should the coalition fall because of budget disagreements.

Meridor charged that the budget “has become a political toy, and that’s unacceptable for managing a healthy economy. There’s a real need right now to work on drafting a 2021 budget, now and not one minute later. You have to start now to meet the deadline [of December 23] set in law.”

Meridor recently came under fire from Katz and Netanyahu for opposing their plan to cut checks to all Israeli adults, regardless of income or whether they were negatively affected by the coronavirus pandemic. In response, Netanyahu’s son Yair, known for his incendiary rhetoric, claimed in an Instagram post at the time that Treasury bureaucrats were intentionally “sabotaging” aid to increasingly disgruntled self-employed Israelis “in order to agitate the public.”

Katz has fired back at Meridor since the Sunday resignation letter. On Monday, he told Hebrew-language media that Meridor only quit after catching wind of his plans to fire him. He also dismissed Meridor’s charges that he is using a heavy hand to force bureaucrats to set fiscal policy based on political interests as “coarse lies.”

Earlier this week, Channel 13 news reported, without quoting a source, that Finance Ministry Director-General Keren Terner Eyal was considering resigning as well, even though she was specifically brought to the ministry by Katz after heading the Transportation Ministry under him for several years.

Keren Terner Eyal, then-director general of the Transportation Ministry, attends a hearing at the Knesset, on March 20, 2017. (Yonatan Sindel/Flash90)

Accountant General Roni Hizkiyahu could also be on his way out, the report said.

Netanyahu last month lashed out at Finance Ministry officials who reportedly opposed his plan to disperse financial aid to all Israeli adults, a strategy that has met with considerable backlash — from economic experts, opposition leaders and members of the public who say aid should be going to the country’s struggling populations, and not to those people who have not been greatly damaged by the coronavirus crisis.

“It’s inconceivable that bureaucrats are briefing [the media] against decisions made by the government, and are working to thwart them. We won’t accept this,” Netanyahu wrote on Facebook. The premier did not name any officials, but shared a post by Likud MK Shlomo Karai that included a large photo of the head of the budget department Shaul Meridor.

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