Cabinet Agrees on a $20.1 Billion Budget for 1984; Cuts Government Expenditures by Some $600 Million

The Cabinet agreed on a $20.1 billion budget for fiscal 1984 last night after slashing government expenditures by some $600 million. The cuts include about $169 million from the defense budget, hitherto virtually sacrasanc and substantial reductions in spending for education and other items.

Agreement was finally reached in a marathon Cabinet session which began yesterday morning and stretched into the night, with frequent interruptions for informal consultations among the ministers. It was achieved only after Premier Yitzhak Shamir made it clear that unless a budget was adopted he would resign, thereby bringing down the government and forcing new elections which Likud obviously does not want at this time.

Shamir was determined to have a budget before the Knesset convenes Wednesday to debate an opposition non-confidence motion. While the coalition has easily defeated such motions in the past, deep internal divisions over the budget, the precarious state of the economy and widespread labor unrest have cast doubt over the outcome of Wednesday’s vote.

ARENS THREATENED TO RESIGN

The ministers have been arguing over the budget for weeks. All agreed a nine percent across-the-board reduction in spending was urgently needed to deal with galloping inflation, the widening balance of payments gap and dangerously low hard currency reserves. But Defense Minister Moshe Arens adamantly opposed the cuts in the defense budget proposed by Finance Minister Yigal Cohen-Orgad.

Arens’ threat to resign yesterday if the cuts were adopted was countered by the same threat from Cohen-Orgad if they were not. At that point, Shamir intervened and, with the help of Deputy Premier David Levy, managed to effect an understanding between the ministers.

The education and welfare budgets also posed problems. Cohen-Orgad told reporters last night that the remaining differences between his proposals and those of Education Minister Zevulun Hammer would be reconciled during the week.

Negotiations are also continuing with the Tami party which controls the Welfare Ministry. Tami has agreed to some cuts but is demanding higher tax exemptions for low income families, increased child care allowances and a new minimum wage law.

According to Cohen-Orgad, the cuts in military expenditures will not have any serious effects on the country’s defense capabilities, a point disputed by Arens, although he finally acquiesced to the compromise supported by Shamir. The $20. 1billion budget finally agreed on is only a shade higher than the $20 billion budget for fiscal 1983. But the cost of virtually everything has soared. The inflation rate for 1983 exceeded 190 percent. Last year’s balance of payments deficit stood at $5.3 billion.

Meanwhile, the coalition and opposition are rallying their forces for Wednesday’s non-confidence showdown. The Likud coalition is trying desperately to muster its four vote majority in the Knesset.

Former Defense Minister Ariel Sharon, embroiled in a bitter dispute with his Herut colleagues in recent days, has reportedly promised to support the government on Wednesday. There had been rumors that he would have liked to see the present government fall, opening the way for a new Likud coalition headed by himself.

The three Tami MKs have not divulged their intentions and their support seems to depend on the outcome of negotiations over Tami’s demands. Former Premier Menachem Begin, who has not been seen in the Knesset since he announced his resignation last summer, is expected to attend Wednesday’s session to cast what may be the crucial vote in support of the Shamir government.