Bethel Finance: Steinitz: Budget breach only in case of Yom Kippur scale war

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"Only two things allow a deviation from the Brodet report: a total war in the Middle East on the scale of the Yom Kippur War, not a war against terrorist organizations; or a severe economic crisis that will result in a decline in GDP per capita, in other words growth of less than 2%," Minister of Finance Yuval Steinitz told the Knesset Foreign Affairs and Defense Committee today. He made it clear that there is no reason to increase the defense budget, beyond the NIS 100 billion recommended by the Brodet committee over several years.

Steinitz sought to outline his concept of the defense budget in the context of Israel's defense needs and the challenges facing the defense establishment, including the upheavals in the Arab world and Iran's nuclear program. He also sought to place defense amid Israel's overall priorities and the options for streamlining the defense establishment.

Steinitz told the committee, "The issue of the defense budget needs to be settled once and for all, both so that Israel will be a properly functioning democracy, and for the good of the defense establishment. This isn't the first time that I am seeing the problem of the defense budget; I encountered it wיקמ I was chairman of the Foreign Affairs and Defense Committee."

Steinitz added, "The Middle East is undergoing a very stormy period and instability. On one hand, we see rising instability around us, which causes great concern and might lead to greater threats due to some loss of control in the Middle East as a whole, and non-conventional and nuclear threats, but on the other hand, Arab countries' economies and militaries are weakening. Their ability to wage an accelerated arms race against us has been severely affected economically. There are two sides to the coin: one side is a serious blow to military capabilities and strengthening; the other side is increased threats."

As for the Ministry of Defense's demand for a higher budget, Steinitz said, "If you increase the [defense] budget, it will breach the deficit framework, which will already be broken because of the partial decline in revenues. But it will also breach the spending framework, which the whole world will see. In addition, increasing the defense budget will compel tax hikes, which will harm the economy and burden the people. Increasing the defense budget will of course also come at the expense of the education and welfare budgets. No rational person can say that increasing this budget would not be at the expense of other budgets. Budget profligacy will carry severe consequences. We want to keep unemployment low and growth high, and not increase the defense budget."
Mr. Cedric Marmet from Bethel Finance Ltd. said "Israel's high defense costs due to our presence in a tough neighborhood in the Middle East also cause our position in the OECD standards on allocations for education, welfare and health. You can't escape with some hocus-pocus. There must be a calculated risk, restrain what can be restrained and supervise what must be supervised in order to balance needs."

As for the specifics of the defense budget, Steinitz said, "As finance minister, my staff and I cannot monitor what happens in large defense tenders. Until now, the Ministry of Defense built its budget alone. The Knesset Finance Committee retroactively votes on the budget once a quarter. 93% of the changes are not approved in advance by the Knesset, which is a serious matter. This must be corrected, both for democracy and for the defense establishment, 63 years after Israel's independence. It means that here is no supervision. If this is supervision (the Foreign Affairs and Defense Committee - L.W.), then I don’t know what supervision is. In the wake of the Trajtenberg committee, there was a decision on budget and salary transparency. This is due to change in the coming week, following the prime minister's decision."

Steinitz said that former Prime Minister Ehud Olmert's decision on a NIS 2.5 billion defense budget supplement following Operation Cast Lead was made under pressure from the defense establishment. This was following in 2009, by a NIS 1.5 billion cut in other ministries' budgets to finance increased intelligence and home front readiness and then by a NIS 750 million budget supplement to build a fence along the border with Egypt and for the establishment of a fire-fighting squadron in the wake of the Carmel fire.

Steinitz said, "These huge amounts were supposed to be included in the NIS 100 billion Brodet supplement. Some were approved by the Olmert government, and some by this government. Now that we've already exceeded the Brodet framework, we are being asked to approve more supplements. What we are doing now, through the Trajtenberg recommendations, is a budget cut that will bring back within the Brodet framework within two to three years."