Israeli Ministers Bracing for Stormy Budget Battle

Vacationing Israeli Cabinet ministers are gathering strength before a new round of meetings on the government’s 1999 budget.

The meetings, which are slated for later this month, are expected to be stormy as individual ministers, representing different political parties, fight for their particular interests.

The main objective of government spending for next year is to boost economic growth while at the same time trimming the budget deficit.

Israel’s economy grew by only 1.7 percent during the first half of 1998, as a prolonged economic slowdown continued, according to data released this week by Israel’s Central Bureau of Statistics.

Boosting growth is one of Prime Minister Benjamin Netanyahu’s biggest concerns. The slowdown has caused unemployment to rise from 7.7 percent last year to 9.3 percent, according to recent statistics.

Netanyahu confidently headed out on his summer holiday in the northeastern Israeli city of Tiberias this week after pushing the general framework of next year’s budget through the Cabinet earlier this month.

The government has approved a budget of about $51 billion for 1999 and an inflation target of 4 percent, compared to a 7 percent to 10 percent target this year. It also seeks to reduce the budget deficit, from a planned 2.4 percent of gross domestic product this year to 2 percent next year. This involves cuts of some $66 million, and each ministry will be asked to contribute equally.

Finance Minister Ya’acov Ne’eman is intent on resisting pressures from ministers to break the budgetary framework.

Finance Ministry officials say cutting the deficit is a key to boosting growth, since lower government spending frees up more funds for the private sector. In addition, planned budget cuts aim to reduce inefficiency at ministries in manpower and general administrative expenses.

Funds will not be cut from infrastructure projects, which analysts and officials agree is a key tool for reviving economic growth.

However, while ministers agree that steps to boost growth are badly needed, they are unlikely to sit quietly when asked to tighten their belts. Indeed, there are rumblings of conflict in the air, with the Ministry of Defense already asking for additional funds for specific strategic goals.

The Finance Ministry says it has the means of making special provisions for defense needs, but insists any additional allocations will not breach the budgetary framework.

But last year, Netanyahu caved in to several demands for additional funding from his coalition partners in extremely stormy budget discussions.

The budget was not approved by the Knesset until the first week of January 1998 — after the end-of-year deadline. Controversy over budget cuts also led David Levy to resign his post as Netanyahu’s foreign minister just a few days before the budget vote.