Reality Check: Hitting the voters in their pockets

Even though his focus must be on balancing the country’s books, Lapid must not make the mistake of not keeping his eye on opportunities for furthering the peace process and prodding an unwilling prime minister into action.

May 5, 2013 22:20
4 minute read.
A Tel Aviv man votes with his dog

A Tel Aviv man votes with his dog 370. (photo credit: Nir Elias/Reuters)

Not unexpectedly, Finance Minister Yair Lapid is beginning to lose his shine. The glow of his election triumph is waning under the reality of preparing the state budget for 2013-2014.

Talks of budgetary flip-flops that surfaced at the end of last week when Lapid surprisingly pushed for a much larger than expected NIS 50 billion budget deficit – or 4.9 percent of the gross domestic product – were further compounded when he then reduced this figure to 4.65% of GDP following a weekend meeting with the prime minister.

To be fair to Lapid, the new finance minister has been dealt an awful hand by the previous government. Back in 2011, when it was clear the country’s deficit was growing and the economy was entering a tough period, Prime Minister Binyamin Netanyahu and his then-finance minister Yuval Steinitz failed to take the necessary action and cut government spending and raise taxes in 2012.

Knowing that elections were scheduled for 2013 at the latest, Netanyahu did not want to enter an election cycle as a leader who had hit the voters in their pockets. In fact, in an act of supreme economic irresponsibility and political cynicism, Netanyahu approved wide-ranging public- sector wage increases, free education from the age of three, subsidized day care and all other sorts of benefits for which he knew the government did not have the money to pay.

And now the time has come to settle these rashly written checks.

The mistake Lapid made was in preparing the country, through the traditional Treasury tactic of selected leaks, for a really tough 2013 budget and then, overnight, suddenly declaring that it was actually OK to increase the deficit this year, before clawing it back to 3% in 2014.

Given the reality facing Lapid, it was never likely that he could have made much a dent in the country’s deficit this year.

As the cabinet only first discussed/approved the budget outlines on Sunday, and the Knesset still has to pass the actual Budget Law, it will probably be around August before the measures laid out in the budget will actually begin to take effect. By then, of course, 2013 will almost be over and so it will be too late to significantly address the mounting deficit. The only chance Lapid had of making an immediate impact was missed when Netanyahu, on forming his government in March, failed to instruct his finance minister to implement an emergency economic rescue plan straight away.

WHICH LEADS us to the second opportunity Lapid is in danger of missing: the Arab League declaration in Washington last week that a return to the 1967 borders is not sacrosanct.

Qatari Prime Minister Hamad bin Jassim al-Thani’s statement that the Arab world was willing to accept “comparable, mutually agreed, and minor” land swaps in any final peace agreement between Israel and the Palestinians is an important diplomatic victory for Israel; the pre-’67 lines as a starting point, not the endpoint for negotiations.

Until now, the Arab League has refused to make any changes to the “take it or leave it” peace plan they first endorsed in 2002, so this shift reflects an important change. It highlights the understanding of key Arab countries such as Saudi Arabia and the Gulf states that given the chaos in the Arab world, and the growing Iranian threat to the region, an Israel-Palestinian peace agreement, with the necessary concessions both sides will have to make, is preferable to allowing this conflict to fester.

And it’s not as if the Israeli establishment is also unaware of the need to reach an agreement with the Palestinians. As Prime Minister Netanyahu himself said last week while visiting the Foreign Ministry in his capacity as acting foreign minister, “the purpose of the future agreement with the Palestinians is to prevent the eventuality of a binational state and to guarantee stability and security.”

This statement raised a number of eyebrows within Netanyahu’s Likud party.

Such remarks are the hallmark of those on the Left, who talk of the danger of Israel’s occupation of the West Bank turning the country into one state for two peoples, thereby ending the Zionist dream. For Netanyahu to suddenly adopt such terminology and warn of the “eventuality of a binational state” marks an interesting departure from his usual rhetoric.

But disappointingly, this change in the prime minister’s rhetoric has not been matched by any change in policy. Despite the importance of the Arab League statement, there has been no official Israeli reaction, with only Justice Minister Tzipi Livni, the minister in charge of negotiations with the Palestinians, voicing any enthusiasm.

In his election campaign, Lapid made clear his support for a two-state solution and the importance, on both economic and diplomatic grounds, of Israel ending its ultimately futile investment in isolated West Bank settlements. Even though his focus must be on balancing the country’s books, Lapid must not make the mistake of not keeping his eye on opportunities for furthering the peace process and prodding an unwilling prime minister into action.

The writer is a former editor-in-chief of The Jerusalem Post.

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