Cabinet Again Fails to Reach Agreement on Budget Cuts

The Cabinet met in special session today to try to reach agreement on budget cuts for various ministries, but for a second consecutive day failed to reach an agreement.

Finance Minister Yoram Aridor, who had recommended a slash of 55 billion Shekels from the government budget, including 20 billion Shekels from the defense budget, was enraged by the failure of the Cabinet to arrive at an agreement and by the apparent lack of support from Premier Menachem Begin for his economic package. Aridor threatened to resign, but under pressure from his Cabinet colleagues, he reportedly backed down from his threat.

The differences between the Treasury and the Defense Ministry continued to be the sticking point in the Cabinet deliberations. Defense Minister Moshe Arens said he was prepared to accept a cut of 8.5 billion Shekels, instead of the 5 billion Shekel cut he was willing to accept last week.

The Treasury appeared willing to accept a compromise on its original 20 billion Shekel cut in the defense budget by postponing some of the reductions to next year, but remained unwilling to settle for Arens’ proposal.

Defense officials say a cut of the magnitude the Treasury is seeking would damage major military projects, such as the development of the new Lavie fighter plane, and would impair and thereby endanger the nation’s vital defense needs.

As soon as the Cabinet session ended, Begin ordered the ministers to work out their differences and come up with an agreed formula. Aridor, Arens and Deputy Premier David Levy began to hold a meeting in an effort to reach an agreement. The Cabinet did not discuss other austerity measures proposed by the Treasury.

Last week Israel devalued the Shekel by 7.5 percent. The Treasury wants to introduce new taxes slash welfare benefits, trim education programs and cut health, communications and transportation budgets.