Prime Minister Ariel Sharon last night decided to reduce the NIS 1.5 billion cut in the defense budget made by former minister of finance Benjamin Netanyahu to NIS 650 million. Minister of Defense Shaul Mofaz and IDF Chief of Staff Lt.-Gen. Dan Haloutz persuaded Sharon that the proposed cut would damage the IDF.
Sharon instructed Ministry of Finance officials to provide the cabinet with alternatives for financing the smaller defense budget cut. Without financing alternatives, the small cut will result in breaching the budget targets and politicians’ commitment to meeting the 3% of GDP deficit and 1% annual ceiling on growth in government spending targets.
Unless other budget items are cut, the smaller defense cut will boost the 2006 deficit to 3.2% of GDP, and raise government spending growth to 1.2%.
Sources at the Prime Minister’s Office said the defense budget had been cut by NIS 5 billion over the past three years, and that the Ministry of Finance’s proposed cuts ignored the Iranian threat. The prime minister cannot accept this.
Another major threat to the 2006 budget is a demand by Vice Premier Shimon Peres to allocate several billion shekels to the development plan for the Negev and Galilee. The cabinet is expected to approve Peres’ proposal in principle, but will probably decide on the actual allocations at a later meeting. In this case, too, unless other budget items are cut, the added spending will boost the deficit by 0.5% of GDP.
The third threat to the budget comes from Minister of Health Danny Naveh, who is demanding a budget supplement of NIS 700 million. He said he would vote against the budget if his demand is not met.
Concerning the smaller defense cut, comments by Haloutz at an earlier cabinet meeting should be remembered. He told Netanyahu about a plan to cut the defense budget and terms of service for career IDF officers and NCOs. “Reports that the Gaza Division will be disbanded as part of the cut in the defense budget are incorrect. The Gaza Division has a difficult mission. This isn’t healthy for soldiers and commanders.”
Haloutz also commented about proposals to cut terms of service for career IDF officers and NCOs. “Many of them have been drafted for the disengagement battalions. This, too, isn’t healthy for soldiers and commanders.”
Published by Globes [online], Israel business news - www.globes.co.il - on August 9, 2005