A decision has been taken: the defense budget will be cut by NIS 3 billion in 2014, and an additional NIS 1 billion will come from the defense budget reserves. The decision came after the marathon talks that had been conducted since yesterday between representatives of the Ministry of Finance and the defense establishment.
IDF Chief-of-Staff Lt.-Gen. Benny Ganz and other staff officers outlined before the security cabinet the IDF's needs for the coming years, including procurements, training and the building of forces, the threats map in view of regional changes in the Middle East, the consequences of large budget cuts for the readiness for future scenarios, programs that could become stuck for lack of funding, and the effect on defense contractors.
The Ministry of Finance believes that in preparing against these threats, the IDF has already invested sufficiently in recent years, allocating large resources to frustrate Iran's nuclear program, build the fence along the Egyptian border and allocate the forces needed to patrol it, place orders for new weapons systems, including the latest combat jets, which are already in the pipeline. It is also in the midst of the multibillion shekel move of bases to the Negev.
The agreement is an achievement for Minister of Finance Yair Lapid, as part of the 2013-14 state budget. Only once before, during the government of Yitzhak Rabin, has the defense budget been cut. The Ministry of Finance added that cut was in the base defense budget, and was therefore not a temporary cut, but a permanent one.
The Ministry of Finance sought to cut the defense budget by NIS 4 billion in 2014, while the Ministry of Defense wanted a special supplement of NIS 1-2 billion. Under an agreement between Prime Minister Benjamin Netanyahu and Lapid, the NIS 1 billion difference in the amounts will not be financed by additional austerity measures, such as tax hikes, but by the defense budget reserves, also known as the "adjustments budget."
The decision to fully budget the "adjustments" in the defense budget, greatly narrows the budget's flexibility if there are changes or unexpected needs in the next two years. "This is a dramatic measure, which enables convergence of the budget in the next two years," said a top Ministry of Finance official.
Asked how to guarantee that the Ministry of Finance will not transfer supplements to the defense budget via the Knesset Finance Committee, as was the practice in previous years, the official said, "If the government wants, during the next two years, to supplement the defense budget, other items will be cut."
"Yesterday, we sat until very late on the defense budget and I decided to bring before the security cabinet and the full cabinet a decision that moderates the proposed cut to the defense budget by NIS 1 billion, which will not be at the public's expense," said Netanyahu at the start of today's cabinet meeting. "I believe that the path I am proposing today strikes a proper balance between the needs of the economy and security needs so as to allow us to achieve both of these goals, even though there is always compromise between such needs, and I think that this is the right compromise."
The cabinet will vote on the budget today. Netanyahu expressed confidence that it will be passed, saying, "This decision on the defense budget will allow us to pass the budget. We will do this today and by the end of today, the State of Israel will have a budget.
"At the same time, we need to continue developing engines of growth. My visit to China, I believe, will aid one of these growth engines - opening the Israeli market, or to be more precise, opening Asia to Israeli initiatives and companies, and this could give us important additional growth. We will also need to continue the structural reforms inside Israel, starting with port reform, and there will be others. We have started this and we will continue with full vigor. These matters - passing a responsible budget, continuing structural reforms and building growth engines - will, I believe, ensure our economic future in the coming years."
Published by Globes [online], Israel business news - www.globes-online.com - on May 13, 2013
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