Treasury and Defense Ministry clash over budget

Budgets director Nissan: The defense establishment takes the easy way out.

"We have the prime minister's full backing, that is the important thing. I am certain that the budget will pass," Ministry of Finance budgets division director Udi Nissan told "Globes" today on the eve of the submission of the budget for 2011-2012.

It is clear to everyone that the most sensitive part of the budget is the NIS 3 billion cut in defense spending that the Ministry of Finance is attempting to push through. This will be the true test for Minister of Finance Yuval Steinitz, and for Nissan.

"The defense establishment has chosen the easy way out. Instead of genuinely streamlining, they come to the prime minister blustering that without more money it will not be possible to meet the 'threats', and the responsibility will fall on him. This is hypocritical, and the current budget is meant to put an end to it," Nissan explains.

Nissan also commented on defense establishment claims that a genuine efficiency drive is taking place. "Streamlining is a difficult process. It's painful, and I understand that," he says. "The streamlining measures that the defense establishment is required to undergo are set out in minute detail in the Brodet report: raising the retirement age, civilianization, abolition of unjustified tax benefits, and reducing the overlap between the Ministry of Defense and the IDF. They are not implementing these measures. That is the fact of the matter, and they can't argue otherwise.

For his part, Brigadier General Maharan Prosenfer, head of the budgets division at the Ministry of Defense and financial adviser to the chief of staff, is fed up of the annual ritual of the defense budget fight with the Ministry of Finance. Talking to "Globes", Prosenfer takes off the gloves, and says, "If the officials at the Ministry of Finance had the courage and the vision to carry out the streamlining measures that the defense establishment has carried out in recent years, it would have been possible to save NIS 44 billion in the past five years in the public sector. That would have solved all of Israel's budgetary problems."

Prosenfer calls the Ministry of Finance "champions at spin" but, he says, they are "tyros at economics." "Had they invested at least 10% of the energy spent on useless battles with the IDF, the economy would be in a different place today." According to Prosenfer, the IDF is also an important growth engine for the Israeli economy. "We invest NIS 4 billion a year in research and development. For every shekel that the defense establishment invests in R&D, the State of Israel makes nine shekels from defense exports.

"The entire shekel defense budget comes back to the state in foreign currency from defense exports, and it would not be possible to reach defense exports of the order of NIS 30 billion annually without the investment by the defense establishment in R&D. Instead of busying itself with trivialities, the Ministry of Finance ought to draw up an economic plan that will expand the cake of GDP, expand the growth engines, and use the IDF and the Ministry of Defense, which are huge growth engines, to propel the economy forward."

In response to the Ministry of Finance's claims that, despite the Brodet report, the defense establishment has not carried out the streamlining measures that it undertook to carry out, Prosenfer says, "The Brodet report stipulated that we should cut costs by NIS 650 million in 2008. In fact, we cut NIS 737 million. In 2009, we streamlined to the tune of NIS 1.1 billion, as required by Brodet, and in 2010 will streamline by NIS 1.67 billion, NIS 20 million more than determined by Brodet. Even Brodet stated that streamlining in a large organization is not a matter of bang and it's over. It has to be carried out responsibly and gradually, as we are doing."

Published by Globes [online], Israel business news - - on July 14, 2010

© Copyright of Globes Publisher Itonut (1983) Ltd. 2010

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