The Ministry of Defense is demanding NIS 6-8 billion from the Ministry of Finance for Operation Protective Edge, senior Ministry of Finance sources told "Globes" today. Minister of Finance Yair Lapid called a press conference this morning in Tel Aviv, where he said, "The Ministry of Defense has presented us with an initial paper that we are now examining. Even if we were to accept it in its entirety, however, it is a negligible proportion of GDP. Intensive discussions are underway between the Ministries of Defense and Finance, and we have already transferred NIS 600 million. We won't begrudge a single shekel for the security of IDF soldiers." It appears that the press conference by the minister and his senior staff is the beginning of a renewed budget battle between the two ministries. "They gave us a number, and we'll finish at a much lower number," a senior Minister of Finance told "Globes" at the end of the press conference.
Addressing financing for defense spending, Lapid said, "The annual government budget is currently 2.5% of GDP, while the deficit target for the current year is 3% of GDP, so we have room below the target to deal with the costs. Concerning 2015, I won't pretend that the operation isn't creating new issues. We're working with the defense establishment, and there are new demands that didn't exist before. We know now how to construct a better budget. We have quite a few ways of saving money and cutting costs. We think the budget deficit for 2015 will be closer to 3% of GDP.
"We're an economically strong country, and unexpected expenses are taken into account. We won't raise taxes. The economy needs growth engines right now, not handicap weights. There's no reason to raise taxes at this time. I'm conducting a continual dialogue with the Governor of the Bank of Israel. By law, she is the government's economic adviser, and we're talking. It's no secret that she thinks taxes should be raised, and I said we won't raise taxes. There are disagreements on this subject. You wouldn't want to live in country with no disputes."
Lapid rejected allegations that the economic slowdown was worsening, saying "There are no signs that things are getting worse. There was a problematic quarter, but the Central Bureau of Statistics figures have been revised. It was only one quarter, and that's not a basis for changing assessments and forecasts. We're constantly monitoring what's happening. The decision not to raise taxes is directly linked to the question of growth. Look at what happened with Operation Pillar of Defense, Operation Cast Lead, and the Second Lebanon War. Our economy is dynamic and strong, and we have every reason to believe in it."
Ministry of Finance Accountant General Michal Abadi-Boiangiu said, "We received a price tag from the Ministry of Defense. We're now going over this price tag. We're looking at it through a microscope and checking every number. In my opinion, it will take at least two weeks to verify what the true cost of the operation was." Like the other Finance Ministry officials, she refused to give a number.
In response to a question why the Finance Ministry was refusing to reveal to the public the Defense Ministry's exact demands, senior Finance Ministry officials hemmed and hawed, but Lapid explained, "There's no single number. Only a few hours have passed since the ceasefire, and it's unsure. Many reserve soldiers are still in uniform. There isn't any one number yet. This is a fact both with us and with them."
Ministry of Finance Director General Yael Andorn said, "We have full confidence in the Defense Ministry, but beyond the direct costs, we want to promote a new agenda with the Defense Ministry, based on a social and civilian agenda. It's terribly important for all of us that as soon as the discussion of the operation's cost is finished, we start a more comprehensive discussion of structural changes in the defense budget. The Israeli economy is prepared to cope with the costs of the operation. We're examining the consequences for the 2014 and 2015 budgets. We're committed to preserve these frameworks."
"We went well into the operation"
Ministry of Finance Budget Director Amir Levy also concentrated his remarks on the defense budget, saying, "We went into this operation, a one-time event, in a good state, and we'll be able to deal with this case. When we implemented the measures for the 2013-2014 budget (a tax hike, A.F.), which were not easy or simple, it was just like dealing with events like this operation. It is important that we go back to investing in the growth-supporting civilian budget after we deal with this event. We worked very closely with the Defense Ministry last month, and we have already transferred funds to provide operational continuity. The operation has ended, and from now on, we'll formulate a consensual outline for compensation, with the aim of keeping the one-time costs created by the operation within the 2014 budget. We want to make changes in the defense budget system in order to facilitate military buildup and dealing with challenges."
Published by Globes [online], Israel business news - www.globes-online.com - on August 7, 2014
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