Defense Ministry demands NIS 20b budget supplement

Gaza operation

The demand includes NIS 9 billion for Operation Protective Edge and NIS 11 billion more for the 2015 budget.

As expected, for the first time since Operation Protective Edge, today's defense cabinet discussion ended without any decision. At the same time, during the discussion, Prime Minister Benjamin Netanyahu informed those present that the discussions were as confidential as any discussion concerning defense matters, and should not be leaked or mentioned in public.

The Ministry of Defense already formulated its budget position several days ago, and has probably presented it to the cabinet: NIS 9 million in the 2014 budget for Operation Protective Edge and the restoration of IDF inventories to their former level, putting the cost of a day's fighting at NIS 180 million. For 2015, the Ministry of Defense is demanding an NIS 11 billion budget supplement, a demand that will increase the defense budget to NIS 63 billion, even excluding the supplements expected in the early months of the year.

The defense establishment has already announced that it is beginning thorough inquiries into Operation Protective Edge, and a new five-year plan is expected to emerge from the conclusions. This means that in the early months of 2015, a budget plan for procurement will be formulated, and possibly also for a different order of battle.

A negotiating technique

Sources who took part in the meeting got the impression that the defense establishment was employing a negotiation technique of presenting demands that the Ministry of Finance could not fulfill. The sums mentioned by the IDF chief of staff, Defense Ministry director general, and chief of staff's financial adviser were higher than those mentioned in the intensive negotiations between the parties in recent days. "If the Defense Ministry gets the amounts it's asking for, you might as well shut the country down," a source familiar with the discussions told "Globes." The fiscal rule dictating the spending ceiling allows an NIS 8 billion budget increase, and the Finance Ministry doesn't intend to give the IDF control of this entire amount.

At yesterday's "Calcalist" economic conference, Minister of the Economy Naftali Bennett, a member of the security cabinet, said, "If the Defense Ministry doesn't become more efficient, it won't get more money. A large defense budget doesn't necessarily mean more security for Israel. First of all, you have to know where every shekel is going. For example, why do non-combat soldiers in the permanent army get the same extraordinary pension rights as a combat company commander?"

At the same conference, Minister of Defense Moshe Ya'alon warned about the new threats in the Middle East, and emphasized that dealing with them was liable to be especially expensive.

No time for hesitation

As in the past, this time also the dispute will be brought for a decision to the prime minister, who traditionally tends to favor the defense establishment. There is no reason to assume that Netanyahu will choose to deviate from this tradition at a time like this, when a renewal of the fighting in the Gaza Strip within weeks is possible, and Jihad terrorism is slaughtering a US Jew on a live television broadcast. Netanyahu does not have much time for hesitation: the cabinet meeting for approving the proposed state budget has been scheduled for one week from today. Even before a draft can be distributed to the ministers, additional important macroeconomic decisions derived from the decision about the defense budget have to be made: whether to increase the budget deficit target above 3%, despite the opposition of the Bank of Israel and the National Economic Council, whether to approve a tax increase, despite the opposition of the Minister of Finance, and what to do about the hot potato called the 0% VAT plan.

Published by Globes [online], Israel business news - www.globes-online.com - on September 3, 2014

© Copyright of Globes Publisher Itonut (1983) Ltd. 2014

Gaza operation
Gaza operation
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