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Israel Cabinet Debates Plan to Shift Spending Following Gaza War

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Aug. 31 (Bloomberg) -- The Israeli cabinet is debating an across-the-board cut in most ministry budgets to provide more funding for defense and towns bordering the Gaza Strip, following a 50-day conflict with Hamas.

Under the plan, ministry budgets, excluding salaries, would be cut by 2 percent to finance some of the one-time costs incurred by the military due to the Gaza fighting, according to the proposal, posted on the Prime Minister’s Office website.

“This reflects our priorities, in which defense comes before everything else,” Prime Minister Benjamin Netanyahu said in the meeting.

Israel is seeking to meet its 2014 budget deficit target of 3 percent of gross domestic product even as growth slows. The 12-month trailing deficit rose to 2.7 percent in July from 2.5 percent the previous month.

The Ha’aretz daily, citing unidentified Finance Ministry officials, estimated direct war costs at as much as 9 billion shekels ($2.52 billion.)

Today’s proposal would provide 1.5 billion shekels over five years to communities bordering on Gaza for economic and agricultural development, as well as additional civil defense infrastructure, Netanyahu said. The government is planning a similar program to develop other towns in southern Israel further from the border, he said. He did not specify how much money would be added to the defense budget.

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

To contact the editors responsible for this story: Alaa Shahine at asalha@bloomberg.net Amy Teibel, Guy Collins

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