The Ministry of Defense says it needs 6-8 billion shekels ($1.7-2.3 billion) to pay for Operation Protective Edge, and a further 11 billion ($3.2 billion) for the overall 2014-2015 budget, Globes reported on Sunday.
The Ministry of Finance is currently resisting the demands, but hasn’t closed the door on the generals and they’re still talking.
Last Thursday, Minister of Finance Yair Lapid insisted at a press conference that the military expenses could be defrayed through existing financial sources, and that higher taxes would not be necessary.
Governor of the Bank of Israel Karnit Flug was less sure. On Sunday, when reporters asked her whether the cost of Operation Protective Edge could be covered within the 2014 budget, Flug answered, “There is still no estimate for this.”
Flug was likewise non-committal on raising taxes: “It will be necessary to decide next year about taxes. The defense requirements resulting from this operation are liable to grow, among other things, and the government will have to decide whether to raise taxes or cut civilian spending.”
The Bank of Israel’s monetary report, published this week, was more forthcoming. The bank’s Research Department said that despite Lapid’s declarations to the contrary notwithstanding, the government would not be able to meet the deficit target (2.5% of GDP) without a tax hike and budget cuts or postponements in spending programs.
Lapid’s optimism is unwarranted, according to columnist Avi Temkin, writing in Globes. This, for two reasons. First, Lapid assumes that the economy will perform in the coming months as it did after Operation Cast Lead in 2008, and especially after the Second Lebanon War.
The second assumption is that he will be able to keep budgetary allocations for 2015 at a low level, despite Operation Protective Edge.
But both assumptions are unrealistic, Temkin argues. As the Bank of Israel noted in its latest survey, the Israeli economy was weak even before the war in Gaza began, and the ongoing fighting will only aggravate the situation.
Judging by Netanyahu’s recent behavior, there is no reason to believe that he will agree to “structural changes” in the defense budget. On the contrary, Netanyahu wants to keep Minister of Defense Moshe Yaalon on his side, an important ally in his battle to maintain leadership of the Likud. And since the latter says that more money for defense is vital, it is likely he’ll opt to give him more than Lapid would, albeit less than Yaalon is asking.