It looks like everyone is making his own claims of victory in the war that has just ended. Judging by the press conference summoned today by Minister of Finance Yair Lapid and the senior officials from his ministry, Lapid's claims of victory consist of a "strong economy" capable of dealing with the consequences of the military campaign: a reasonable growth rate; a low deficit, even if taxes are not raised; a restrained defense budget; a reliable financial sector; and businesses to be filled with customers in the coming months. It is difficult to understand how the finance minister forgot to add his 0% VAT plan for purchasers of a first apartment, because if you're already talking about victory and limitless optimism, you might as well take the opportunity to imagine your pet project triumphantly sailing off into the sunset.
In order to paint this rosy picture, Lapid had to make two assumptions. The first, as he himself said, is that the economy will behave in the coming months just like it did after Operation Cast Lead, and especially after the Second Lebanon War. The second assumption is that he has the political power to force the Defense Ministry to accept low 2015 budgetary compensation for the war in the south. In other words, Lapid is assuming that in contrast to what happened before, Prime Minister Benjamin Netanyahu will this time support the Finance Ministry's stance against the Defense Ministry.
The problem is that these two assumptions do not meet the test of reality. As the Bank of Israel mentioned in its latest survey of the Israeli economy, the local economy was weak even before the war in Gaza began, and the military conflict will only aggravate the situation. This is very different from what happened after the Second Lebanon War, when both the global and domestic economy were booming.
Judging by Netanyahu's recent actions, there is also no basis for the assumption that the prime minister will agree to "structural changes" in the defense budget and setting priorities in it. The political alliance between Netanyahu and Minister of Defense Moshe Ya'alon is very close, and the prime minster very much needs it. It is therefore better for Lapid to look for a different, less optimistic, and more realistic picture. The one he tried to sell the public at the press conference is nothing more than an exercise in wishful thinking.
Published by Globes [online], Israel business news - www.globes-online.com - on August 7, 2014
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