In what must rank as one of Israel’s weirdest election campaigns, the huge
existential issues facing the nation were hardly touched on. There was no real
debate on the Iranian bomb or on growing international impatience with Israel’s
continued occupation of the West Bank. Now reality is about to strike with a
As soon as the new government is formed, it will have to deal
with a comprehensive European- led blueprint for peace with the
Palestinians.It will also have to develop a strategy to restore
fractured ties with US President Barack Obama and to combat growing
There are major economic challenges
The new government will have to come to grips with its fiscal cliff,
last year’s massive 39 billion shekel ($10.5 billion) budget deficit, as it
frames the budget for 2013 and produces a plan to bring down soaring housing
prices. Then, in the summer, just a few months down the road, it may have to
take a momentous decision on the Iranian nuclear threat – whether to bomb Iran’s
nuclear installations on its own or trust the US to stop Iran going nuclear
after it has crossed what Israel sees as the point of no return.
all that were not enough, there are two more major domestic issues on the
national agenda: Changing the electoral system to create stronger and more
coherent government, and drafting the ultra- Orthodox, mainly so that they can
join the work force in large numbers and stop bleeding the economy.
new European peace initiative aims to secure agreement on a Palestinian state in
the 1967 borders with land swaps and with East Jerusalem as its capital.
Spearheaded by Britain and France and strongly backed by Germany, it could
become formal EU policy. John Kerry, the incoming US Secretary of State, is also
keen to restart an Israeli- Palestinian process, and will likely throw his
weight behind the European effort, and possibly even take the lead. The
Europeans intend to add a regional dimension, and will invite Egypt, Jordan and
the Gulf States to participate.
The idea is to discuss all the core
issues, borders, security, Jerusalem and refugees, with the regional players
helping out on Jerusalem, refugees and wider accommodation with Israel. The goal is to reach a comprehensive peace deal within a
If all the Arab players agree to come in, it will be difficult for
Israel to stay out. The new government will have to do some serious thinking
about bona fide movement towards a two-state solution or risk being branded the
rejectionist party and facing international isolation.
The importance of
Obama’s recently leaked comments about Prime Minister Benjamin Netanyahu acting
against Israeli interests is not so much the intervention in Israeli politics or
the soured relationship between the two men, but the substance of what the
president had to say. If Israel continues to defy world opinion on the
occupation and if the American President believes this will lead to
international isolation, it could become a self-fulfilling
Obama will not cut aid to Israel or downgrade strategic ties,
but he may well lift America’s diplomatic umbrella. That would have major
implications for Israel- Palestine on the world stage and for Israeli trade.
That is not a place the new Israeli government will want to go.
All the more so if it wants international support against Iran in the summer.
For Israel, the key question is how far advanced the Iranians will be by then.
For a bomb they need a stockpile of around 250 kilos of 20 percent enriched
uranium, which would then have to be further enriched to over 90 percent to
produce weapons- grade fissile material. By last November they had stockpiled
135 kilos and since then have been producing another 15 kilos a month. At this
rate they could have enough material by around August.
But the equation
is not that simple. In the past, the Iranians have used much of their 20 percent
enriched uranium to produce fuel for medical research, significantly depleting
the amount available for potential weaponsgrade enrichment. Whether they have
enough for a bomb by August will depend on how much they use for new fuel
According to the Washington-based American Enterprise Institute,
with additional centrifuges now operating in Fordow, the Iranians could
significantly step up the rate of enrichment and have enough material for two
bombs by late 2013 or early 2014.
Other US experts, including former UN
nuclear inspector David Albright, estimate that Iran will have enough
weapons-grade uranium for one or two bombs by mid-2014.
The new Israeli
government may not want to wait that long. It may feel it needs to act before
Iran goes beyond what it sees as the point of no return. Both Obama and Defense
Secretary designate Chuck Hagel are committed to stopping Iran going nuclear,
but not necessarily at Israel’s pace. This creates a dangerous disparity, which
could lead to an Israeli strike. Only a credible American threat of force could
persuade the Iranians not to proceed and Israel not to attack.
weighty decisions on Iran, the new government will have to address this year’s
problematic budget. The 2012 budget deficit was supposed to be 2 percent of GDP,
18.3 billion shekels, but in actual fact at 39 billion was more than double.
True, most of this deficit has already been balanced by more government
borrowing from the public – last year it sold 113 billion shekels worth of
government bonds and paid back 75 billion, leaving it with 38 billion to cover
But this is money it still owes the public.
outgoing government overspent mainly on defense, infrastructure projects and
free kindergartens. According to exprime minister Ehud Olmert, it wasted 11
billion shekels on military preparations for a strike against Iran “that will
It also collected less tax than in previous years, mostly
as a result of cuts introduced by Netanyahu in 2011 against the advice of top
Finance Ministry and Bank of Israel officials.
The new budget ceiling can
go 13 billion shekels higher than last year’s, but the government has already
made commitments of around 30 billion more, so that it needs to cut around 17
billion just to stay on budget.
Instead of at least some of these cuts,
it could raise taxes. The question is what to cut and whom to tax. Defense,
which made up a whopping 16.7 percent of last year’s budget, will be a prime
target. So will corporate taxes.
Another possibility would be to raise
the 2013 deficit from the already agreed 3 percent to say 4 percent, which would
allow spending of another 9.5 billion shekels. But the Bank of Israel is
strongly opposed, arguing that raising the deficit could trigger a downgrading
of Israel’s credit rating.
One of the most urgent socioeconomic problems
the new government will have to deal with is the housing crisis. During the
outgoing government’s term, housing prices rose on average by 48 percent. The
plan Netanyahu introduced in July 2011 to make more housing available and bring
down prices was largely ineffective. In the third quarter of 2012, building
starts were actually down by 37 percent compared to the same period in
The new government will have to free more land for building, ensure
easy lines of credit for contractors, bring in enough building laborers to
handle a host of projects across the country, and build affordable public
housing. Up till now it has not been able to launch a coordinated master plan,
partly because of red tape, with different authorities often working at cross
For example, although more land was zoned for building in 2011
and 2012, bank credit to contractors was limited. As a result, there were few
takers to develop available building projects.
As things stand, the
Interior Ministry is responsible for planning; the Housing Ministry and Israel
Lands Administration for marketing of land; the Bank of Israel for mortgage and
loan policies; the Finance Ministry for tax policy and the Trade and Industry
and Interior Ministries for the labor force. There is a crying need for an
executive department that controls and oversees all aspects of a grand
nationwide housing plan.
If pre-election promises are to be believed, the
new government will also consider changing the electoral system. The goal will
be to strengthen governance by having fewer, larger parties and accountability
by having a sizable number of Knesset Members elected in
There are a number of proposals that have been doing the
rounds for years now. For example: The leader of the largest party, not the
largest bloc, automatically becomes prime minister, encouraging people to vote
for the party led by their preferred prime minister and not one of the smaller
parties in the same bloc; raising the threshold for election to the Knesset from
2 percent to around 5 percent, encouraging smaller parties to form electoral
alliances; allowing voters to order the list of candidates for the party they
vote for on election day, eliminating the need for expensive party primaries and
avoiding the anomaly of people joining a party to influence its Knesset list and
then voting for someone else.
The new government will also have to pass
legislation to replace the now defunct Tal Law on drafting yeshiva students. If
they follow the recommendations of the Plesner Committee set up by Netanyahu
last year – and then ignored by him – the goal will be to cut the number of
annual exemptions to around 1,500 exceptional Torah students, and to have around
6,000 others serving in the army every year. There would be financial incentives
for the yeshivas whose students serve, and for the students
The importance of this is that after they serve, tens of
thousands of yeshiva students will be able to join the work force, no longer
having to claim full-time Torah study to avoid the draft.
But on this, as
on all other major issues, much will depend on the composition of the new
governing coalition. Israel faces a host of huge existential issues. The
question is will it get a government able to handle them.
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