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Lapid, Netanyahu spar over 2015 budget

Talks to continue after meeting ends in deadlock, with prime minister and finance minister at loggerheads over borrowing levels and defense budget

Marissa Newman is The Times of Israel political correspondent.

Yair Lapid, left, at a community singalong in southern Israel on Friday, September 12, 2014. (photo credit: Courtesy)
Yair Lapid, left, at a community singalong in southern Israel on Friday, September 12, 2014. (photo credit: Courtesy)

Finance Minister Yair Lapid presented his 2015 budget proposal Sunday, as opposition mounted against a number of his propositions, including allowing for heavier borrowing and not increasing defense spending.

A meeting between Lapid and Prime Minister Benjamin Netanyahu ended without a resolution, but talks are set to resume in the coming days, according to Channel 2.

The proposed budget called for taxes to stay at their current level, the deficit cap to rise to 3.18 percent of gross domestic product, and the Defense Ministry to receive an unspecified amount of its requested increase.

Finance Ministry officials, Bank of Israel head Karnit Flug, and Netanyahu have publicly opposed Lapid’s plan, saying that the deficit should not top 3%.

The prime minister has also pushed for an additional NIS 20 billion ($5.5 billion) to be allocated to the defense establishment — NIS 9 billion to cover the costs of Operation Protective Edge and NIS 11 billion for upcoming expenses — a measure Lapid has opposed.

Lapid has threatened in past weeks to pull out of the governing coalition if taxes are raised, and has repeatedly pledged that the costs of the 50-day military campaign would not be paid for by a tax increase.

The exit of Lapid’s 19 seats from the coalition would likely necessitate early elections.

The Treasury said in a statement Sunday that the 2015 plan “responded to the needs of the Defense Ministry as well as social and civil needs,” but stressed that the security funds must be added “while staying within the prescribed expenditure framework.”

While the statement suggests that the Finance Ministry is in favor of giving more money to defense, a senior official told the Globes business website that Lapid is staunchly opposed to granting the NIS 11 billion addition.

With regard to taxes, the Finance Ministry maintained that “in light of indications of slowdown of economic activity, it would not be right to raise taxes.”

On Saturday, sources close to Netanyahu maintained Lapid deliberately proposed an “unacceptable” budget in order to push the government toward new elections. The sources told Channel 2 on Friday that the reason behind Lapid’s insistence on a budget that the government could not accept was that he wanted new elections to be held.

Though Lapid has denied that these are his intentions, the sources said the finance minister is well aware that his proposed budget is likely to cause a rift within the coalition.

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 budget request to the security cabinet two weeks ago during its weekly meeting, the first since Operation Protective Edge ended with an open-ended truce, 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.

Earlier this month, 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 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.

Times of Israel staff contributed to this report.

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