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Israel’s Barak Calls for Boosting Budget and Army Spending

Israeli Defense Minister Ehud Barak called for expanding military spending and breaching budgetary targets, a move that Finance Minister Yuval Steinitz said might weaken the economy and increase unemployment.

Barak, who spoke at a Knesset Finance Committee meeting today, said it would be impossible to satisfy the minimum requirements for security and increase social welfare without raising expenditure beyond the planned limit, according to an e- mailed statement from the panel. He also said that if Israel reduces its defense budget, the U.S. may decide to decrease its military aid as well.

“We are in a period of general uncertainty, in which along with the Arab Spring, the results of which are hard to predict, the threats are growing, with Hezbullah in Lebanon and Hamas in Gaza, and Iran in the background,” Barak said.

The Cabinet on Oct. 9 approved a government panel’s recommendation to cut defense spending to help finance an increase in social welfare expenditure following mass protests over the high cost of living. The Israeli budget, when passed in December, called for a 2.7 percent increase in spending next year.

Barak said concern that rating companies may cut Israel’s rating if its budget deficit increases is “baseless” and that the government doesn’t need to take the agencies “so seriously.”

In response, Steinitz said that “populist proposals to breach the budget framework could lead Israel to economic deterioration and mass unemployment.”

Steinitz also said that Israel’s success in dealing with the global economic crisis was in part due to the government’s “fiscal responsibility.”

To contact the reporter on this story: Alisa Odenheimer in Jerusalem at aodenheimer@bloomberg.net

To contact the editor responsible for this story: Louis Meixler at lmeixler@bloomberg.net

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