While this move may ostensibly appear to make sense, any further delays in the passage of the budget could be extremely harmful to Israel and its economy. The coalition agreement signed between Likud and Blue and White calls for a two-year budget, for 2020 (which still has not been allocated) and 2021. Gantz is sticking to his guns on the issue, with the support of most economists, saying it will stabilize Israel’s shaky economy, while Netanyahu is adamant about a one-year budget (until the end of the year), citing the economic uncertainty caused by the pandemic.
Bank of Israel Governor Amir Yaron added his rational voice to the debate on Sunday, urging the government to pass the budget as soon as possible and warning that new elections would harm an economy that has already been severely damaged. “The government must move forward as quickly as possible to determine a clear pattern of the state budget and take the necessary economic decisions in the current context,” Yaron said.
Finance Ministry officials supported Yaron’s call, warning that any further delay in passing the budget could prompt international credit agencies to downgrade Israel’s ranking, which would have serious repercussions on the state’s ability to raise capital overseas. Israel currently has a solid international credit rating from all three leading agencies, with an S&P ranking of A+, a Moody’s ranking of A1 and a Fitch ranking of AA-.
Delegates of all three agencies are set to visit Israel next week to assess how the country is dealing with the COVID-19 crisis – and the lack of a state budget could cause them to alter their views on the Israeli economy’s stable outlook.
The Finance Ministry’s Accountant-General Rony Hizkiyahu argued that the failure to pass the budget would not only herald new elections and deal a serious blow to the economy, but endanger Israel’s international fiscal standing – something that it cannot afford to risk during the worst economic crisis it has experienced in its 72-year history.
“We have to be very careful,” Channel 12 quoted Hizkiyahu as saying. “The absence of a budget after three election campaigns signals poor government stability, and the rating agencies could see that as an indication to downgrade the rating.”
Tensions between Netanyahu and Gantz reached boiling point at a meeting of cabinet ministers on Sunday, with both leaders raising their voices at each other. Addressing a Likud faction meeting on Monday, Netanyahu said there is no reason to hold elections that no one wants. “We have to pass the budget immediately so we can allocate more funds to the public and provide the economy some certainty and stability,” he said. “Insisting on a two-year budget instead of an immediate one means extensive curbs and imposing painful measures [on the public]. It’s the exact opposite of what we should be doing.”
Gantz has consistently argued in favor of a budget that extends until the end of next year. In an interview with Channel 13 at the end of July, Gantz said, “I won’t change my position, because I feel we need a budget with long-ranging elements and therefore this is the proper way to do it... Any deviation or attempt to escape this would only be done by someone who wants to head into an election.”
It’s time for the country’s two leaders to put aside their budgetary dispute and focus on the primary war in which Israel is engaged – fighting the spread of coronavirus and its devastating consequences. We urge Netanyahu and Gantz to bury the hatchet, and for the sake of the country, expedite the passage of the state budget – for the sake of all Israelis.