After 17 hours of debate that stretched into the wee hours of Wednesday morning, Israel’s Cabinet adopted a budget that essentially says “yes” to demands for increased defense spending and “no” to Ariel Sharon’s request for more immigrant housing.
The $33.9 billion budget for 1992 also leaves a deficit equivalent to 6.3 percent of Israel’s gross national product.
While this is down from 6.9 percent of GNP in the 1991 budget, Treasury officials had warned that any deficit larger than 5.5 percent of GNP would cause a new spiral of unemployment and inflation, which is hovering around 21 percent.
Treasury officials also told the Cabinet that such a large deficit could make the United States uneasy about granting Israel guarantees for $10 billion in commercial loans it is now seeking.
At a news conference Monday, Finance Minister Yitzhak Moda’i said Israel had “already received queries from the Americans regarding our ability to repay the loans.”
In an apparent move to assuage such concerns, members of the Cabinet committee on economic affairs convened Wednesday to begin discussions on how to gradually reduce the budget deficit. Moda’i proposed it be eliminated by 1995.
The Cabinet’s 11-6 vote to approve the budget took place around 1:30 a.m. Wednesday, after hours of grueling debate over conflicting demands from the various ministries.
In the end, the governing body decided on a 3 percent across-the-board cut for all ministries except Defense, which will receive an increase of some $158.6 million.
The Treasury had demanded substantial cuts in both the defense and housing budgets, in order to curb inflation. But the Defense Ministry had asked for an additional $440 million every year over the next five years.
FUNDS FOR ONLY 15,000 HOUSING UNITS
In the end, Defense Minister Moshe Arens prevailed, thanks to the backing of Prime Minister Yitzhak Shamir.
In order to free up some $220 million for the defense budget, the Cabinet cut into the allotment for immigrant absorption.
It did so not by cutting the amount needed to absorb each immigrant but rather by lowering the estimate of how many immigrants will arrive during the next year from 250,000 to 200,000. This freed up some $175 million previously earmarked for immigrant housing.
Housing Minister Sharon was predictably furious over the decision to reduce his budget to provide for only 15,000 new housing units to be built by the government next year. He charged it was an “anti-Zionist” decision, returning the country to “distant, dark days.”
Defense officials greeted the Cabinet decision with a sigh of relief. They had argued all along that the requested increases were the minimum requirement to meet Israel’s future security needs, in the face of a proliferation of missiles in the Middle East and a general expansion of Arab military strength.
But the budget battle is not yet over. The Cabinet’s approval is only the starting point in a lengthy process of deliberations culminating in a vote by the full Knesset.
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