Israeli Budget Faces Battle After Marathon Cabinet Session

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Israeli ministers argued into the early hours Thursday before approving the 2015-2016 budget, presaging a tough battle for authorization in a parliament Prime Minister Benjamin Netanyahu barely controls.

The spending plan was approved after Netanyahu and Finance Minister Moshe Kahlon acceded to ministers’ demands to boost spending for education, health, welfare, police and culture by billions of shekels. Those concessions brought the 2015 budget to 329.5 billion shekels ($86.4 billion) and 343.3 billion shekels for 2016.

“It’s going to be difficult for Netanyahu because he can’t afford even one defector to the opposition, and will be subject to all kinds of political blackmail,” said Abraham Diskin, professor emeritus of political science at the Hebrew University of Jerusalem.

“We have had governments fall over the budget process, though I think at the end Netanyahu will probably get this one through because we had elections so recently, just last March,” Diskin added.

Netanyahu’s coalition controls 61 of parliament’s 120 seats, a situation that puts him at the mercy of even his smallest coalition partner. This has weakened his ability to govern, as evidenced by his failure to push through controversial gas market regulations.

The cabinet set the 2016 deficit at 2.9 percent of gross domestic product, a target Bank of Israel Governor Karnit Flug criticized this week as indicating fiscal irresponsibility. She also voiced skepticism that the target would be honored.

Markets Unruffled

Israeli markets had little reaction to the budget battle at this preliminary stage, with the benchmark TA-25 index down 0.1 percent at 3:26 p.m. in Tel Aviv, and the shekel strengthening 0.2 percent to the dollar to 3.8072.

In an e-mailed statement after the vote, Netanyahu praised the proposed budget as balanced and responsible, saying it promotes growth. Defense Minister Moshe Ya’alon abstained in the budget vote to protest proposed defense spending, the only cabinet member to withhold support.

The spending plan now goes to the Knesset, Israel’s parliament. The coalition has until Nov. 19 to get it approved or face collapse under Israeli law.

Lawmaker Shelly Yachimovich of the opposition Zionist Union faction criticized the budget, telling Israel Radio that any additional social spending approved by the government will later be neutralized by a mandatory 3 percent budget cut for most ministries, resulting in “a reduction in services to the public.”

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