Steinitz and Stanley Fischer 370.
(photo credit: Courtesy)
Officials at the Defense Ministry described the intervention of Bank of Israel Governor Stanley Fischer on their behalf as "dramatic" on Wednesday, in the midst of a battle with the Treasury over the future defense budget.
The Treasury wishes to decrease the defense budget by some three billion shekels, while the Ministry of Defense says Israel's security environment is growing more complex, and that cuts would be harmful.
During a cabinet meeting held in the Knesset to discuss the issue, Finance Minister Yuval Steinitz argued that the Arab countries have neglected military procurement spending for years because of economic crisis, thereby casting doubt on the Defense Ministry's claim to need extra funds. He further stated that if the defense budget is increased heavily, it will come at the expense of social services.
Treasury officials presented data showing that the defense budget has reached NIS 60.578 billion this year, well above the figure of NIS 50.500 billion set out for 2012 in the original biennial budget. They claimed the Defense Ministry saved just NIS 0.8 billion of the NIS 10 billion it was obligated to save under the Brodet Commission’s five-year plan for 2008-12.
But Bank of Israel Governor Stanley Fischer contradicted Steinitz, telling the cabinet that the Defense Ministry stood “more or less” by its expenditure obligations under the Brodet plan, according to central bank officials. The Brodet plan was formulated after the 2006 Lebanon War, and set defense spending targets for the course of a decade.
"After the harsh attack on us, Fischer intervened, and what he said was dramatic," a Defense Ministry Source told The Jerusalem Post
The source stressed that during the meeting, the Defense Ministry showed that it had saved 9.4 billion shekels over the past five years through efficiency plans, and that it planned to save 60 billion shekels between now and 2017.
Prime Minister Binyamin Netanyahu said at the outset of the meeting that Israel must address the historical changes taking place in the Middle East while prioritizing defense needs.
"The threats directed at the State of Israel are changing and we need to be prepared for that," Netanyahu said. "We need to ensure that the security Israeli citizens have enjoyed in the past three-and-a-half years continues through the changing conditions."
The discussion, he continued, is about prioritizing components of the defense budget in Israel's long-term defense planning, not about nitpicking over every clause or cent in the budget.
Cuts to the national budget, he said, were necessary in order to "move forward" on the 2013 budget.
Netanyahu said that the ministers would be asked not only to decide how much to spend on defense, but also to decide "where to invest the money."
Observers noted that Netanyahu hopes that by getting the full cabinet to decide where the money will go for security, they will be less reticent down the line when they will be asked to make cuts in their own ministry to pay for the defense expenses. Netanyahu said that the decisions made will have consequences for the next decade
Netanyahu characterized the meeting as a "unique discussion" that usually takes place once every five years in a smaller forum, and that at a certain point this discussion might also be reduced to a smaller number of ministers.
But, he said, "I would like all ministers, to the best of our abilities, be party to the decisions that I think will greatly determine the government's budget for the State of Israel." He said the discussion will not likely be completed in one day.
It is believed that Netanyahu will postpone the cabinet’s general budget discussions from mid-September to mid-October, over concerns the Knesset will not approve the 2013 state budget as it currently stands. This raises doubts the government will pass the budget before the December 31 deadline. In such a scenario, it would continue operating according to the 2012 budget next year.