Battle over Defense Budget

The Defense Ministry and the Treasury are locked in a struggle over cuts in defense expenditures that will become necessary as a result of the decision by Finance Minister Yigal Hurwitz’s economic cabinet this week to freeze the national budget at its present level. The freeze, ordered because of the unexpectedly high rote of inflation–10.2 percent–last month, rules out supplementary appropriations needed to compensate for the eroded purchasing power of the Pound.

This court jeopardize major defense projects, notably the “Lavie,” Israel’s second generation jet fighter plane. Defense Minister Ezer Weizman declared that he would resign if “even one penny is cut.” Hurwitz said today, “I do not intend to reverse my stand. Projects must be frozen.”

The situation was complicated when Weizman ordered the Director General of the Defense Ministry, Yosef Moayan, to sign on IL 70 million contract today for a defense project, despite a warning by the Treasury that any such transaction would not be honored.

A legal problem is expected to develop because the Ministry cannot execute contracts without the approval of its accountant. The latter is subordinate to the Treasury. If he refuses to authorize the contract, he will incur Weizman’s wrath; if he approves, Hurwitz has made it plain, he will be fired.

A Defense Ministry official said today that Israel’s defense forces are now close to the danger point as a result of earlier budget cuts. “If the government decides to have a smaller army it must adapt such a decision but it cannot maintain the present army with an even smaller budget,” he said.

Meanwhile, Premier Menachem Begin is attempting to mediate between Weizman and Hurwitz before the full Cabinet meets this Sunday to act on the economic cabinet’s budget freeze. Weizman has threatened to quit the government before over other issues and observers noted today that his latest threat was less serious than his previous ones.