Blue & White v. Likud: Three budget scenarios

Benjamin Netanyahu and Benny Gantz / Photo: Knesset Spokesperson Adina Walman , דוברות הכנסת

With the coalition partners locked in a power struggle, Israel's economy is the loser.

Last week, the music started up again. Blue & White opened an attack on Likud, demanding that the 2020-2021 state budget should be passed. For its part, the Likud party is prepared to pass the 2020 budget by December 23, and only afterwards, perhaps, subject to political conditions, to work on approval of the budget for 2021.

Despite bad economic figures, it's hard to say that the motives of the parties to the dispute are entirely businesslike, and do not stem from the desire to ensure that Blue & White leader Benny Gantz takes over from Benjamin Netanyahu as prime minister in March 2021, as called for by the rotation agreement between them, or to thwart that outcome.

There are three possible scenarios:

Scenario 1. Approval of the 2020 budget in December

The simplest thing to do is to pass a single-year budget for 2020 in by December 23, the date on which, unless a budget has been passed, the government will automatically fall and the Knesset will be dissolved, after which there will be a new Knesset election. A 2020 budget already exists in a Ministry of Finance drawer, amounting to NIS 411 billion, and it has already been passed once by the Knesset Finance Committee. If it is brought before the Knesset for approval without the usual accompanying Economic Arrangements Bill, matters will be even simpler. All the documents have already been drafted for the discussions on an NIS 11 billion budget supplement. The law under which the deadline for approving a budget was extended to December 23 contains no commitment to a to-year budget, something that Blue & White perhaps ought to have demanded at the time.

This plan is supported in Minister of Finance Israel Katz's circle. The idea is to pass the 2020 budget by December, even with an Economic Arrangements Bill containing certain economic reforms that are at present stuck in discussions with the Ministry of Justice headed by Blue & White's Avi Nissenkorn, and only after that to turn attention to the 2021 budget. Blue & White is pressing for it all to be done at once.

"Globes" has learned that a discussion has been set down for Tuesday of this week at the Ministry of Finance involving the minister, senior officials, and the acting head of the Budgets Division. Katz reportedly does not intend to present an expenditure cutting budget, because of the continuing effects of the coronavirus pandemic, which will last into next year, and instead of targets for reducing the fiscal deficit to introduce extensive aid programs.

Those close to Netanyahu say that, despite the political agreements with Blue & White, he supports passing the 2020 budget first and deferring the 2021 budget indefinitely. That was he keeps the door open for elections at the end of March 2021, if that year's budget has =not been passed by then.

Blue & White, on the other hand, insists that there are only two choices: either a two-year budget by the date stipulated by law, or an election. In fact, sources in the party with whom I spoke say that it will not be possible to prevent passage of the 2020 budget it the impression is created that the Ministry of Finance is also working on putting forward the 2021 budget after that, mainly because of the tight timetable.

Scenario 2: Approval of a two-year budget in December

The chances of this scenario coming about are slim. Blue & White embarked on a publicity campaign last week on the need for a two-year budget, after realizing somewhat late in the day where Netanyahu was heading. Senior figures in the party threaten that unless the Ministry of Finance gest down to work on a double budget, they will not approve any of the ministry's proposals in the government, including aid programs for the self-employed and more money for the unemployed.

The Knesset will still be able to pass the aid programs with help from opposition MKs, but in the government Blue & White's agreement is required, and without it economic measures could be stuck until an election takes place because of the failure to pass a budget.

"What we say this week was just the start," a Blue & White minister said concerning statements by members of the party attacking Netanyahu, and added, "It will get much uglier. Netanyahu called on Benny to form a unity government and from the first moment started to betray his trust and the agreements that were signed. This is a political decision. We are only exposing this to the public so that it will know who it is dealing with."

Likud, it should be said, did not take the ultimatum seriously, and claimed that it would be Blue & White that would have to explain to the public why it was preventing aid programs for self-employed and unemployed people. "In the end, they will have to face the unemployed and the business owners," a senior Likud minister said.

Blue & White is sticking by the demand that the coalition agreements should be honored. In the Likud party, no-one any longer treats the documents signed at the start of the first wave of the coronavirus pandemic as binding.

Scenario 3: No budget is passed

In this scenario, the power struggle between Likud and Blue & White results in no budget being passed. In that event, Israel will go to the polls, with government spending in 2021 being derived, unprecedentedly, from the budget for 2019 (without supplements), which itself was planned in March 2018.

While the Ministry of Finance waits for precise instructions from Netanyahu and Gantz, this crisis, like previous ones, will probably rumble on until a decision at the last minute. The decisive time is the first week of December. If by then no draft budget has been presented to the government, the Knesset no longer pass one, and then, they say in Blue & White, we will understand that we are heading for an election.

If by then Likud and Blue & White do not reach agreement at least on passing the 2020 budget, Blue & White intends to act against Netanyahu and the Likud with all the means at its disposal, mainly through legislation, in cooperation with Avigdor Liberman and Yair Lapid, and "unmercifully", as they put it. Blue & White has no intention of making life easy for Likud by resigning from the government, which is why the party is slamming down on those of its ministers and members of Knesset who are criticizing its continued presence there. "WE shall remain in the government with Netanyahu, and we will exact a price from him for having breached the unity agreement, in cooperation with the opposition," a senior Blue & White minister said.

In this battle, Blue & White or Likud might win, but the country will lose if the 2019 budget still applies in 2021.

An election in such a situation will paralyze government ministries, particularly Gantz's Ministry of Defense, which needs budget additions and revisions from year to year, even more so if the pandemic continues. This is important for Netanyahu as well. He needs to go to the country on firm economic ground. Without that, and given the growing criticism of his handling of the coronavirus crisis, an election will be a big political gamble.

Published by Globes, Israel business news - en.globes.co.il - on October 11, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

Benjamin Netanyahu and Benny Gantz / Photo: Knesset Spokesperson Adina Walman , דוברות הכנסת
Benjamin Netanyahu and Benny Gantz / Photo: Knesset Spokesperson Adina Walman , דוברות הכנסת
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