Netanyahu Seeks to Shift Funding from Civilian to Defense Programs

YERUSHALAYIM (Reuters) -
netanyahu
Israeli Prime Minister Binyamin Netanyahu delivers a statement to the media after a visit to the Palmachim Air Force Base near Rishon LeZion, Sunday. (Abir Sultan/Pool via Reuters)

Israeli Prime Minister Binyamin Netanyahu plans to shift funds designated for civilian purposes to military spending to meet any threats from Iran, a government official said on Tuesday.

PM Netanyahu, in a speech on Monday, did not specify the amount of the funds but said they needed to be moved “now.”

Asked about the prime minister’s remarks, the official made clear that no such shift was imminent.

“Until a (2020) budget is passed, no changes can be made to expenditure. Future budgets will have to take the moving of funds into account,” the official said.

Limited in power, Netanyahu’s caretaker government has been unable to rein in a budget hole, delaying a parliamentary vote of approval on next year’s budget into 2020.

In his speech, Netanyahu accused Iran of seeking the means to turn Yemen into a staging ground for launching precision-guided missiles at Israel and said budgetary priorities needed to change.

“To be strong militarily, we have to shift now money from the civilian areas to the military areas,” Netanyahu said.

Israel’s economy has been in a holding pattern amid the political uncertainty for months, and analysts believe the next government will need to trim spending to stick to fiscal targets, but more likely, taxes will rise.

“When it comes to civilian spending, to a very large extent his (Netanyahu’s) hands are tied,” said Leader Capital Markets Chief Economist Jonathan Katz. “It sounds like a great slogan, but what’s more realistic in interpreting his statement is that defense spending will grow more rapidly than civilian.”

He said that about 80 percent of civilian spending is public sector salaries and those will not be touched. Instead, infrastructure projects might be delayed, while subsidies to after-school care for toddlers may be suspended, along with raising taxes.

Cutting civilian spending could also harm growth, since at 30 percent of economic output, Israel is second to last in such expenditures out of OECD countries. As such, the Bank of Israel said in a report that with civilian spending so low, “it is difficult for the government to allocate resources to policy measures that will entrench long-term economic growth.”