BICOM

Prime Minister Benjamin Netanyahu and Finance Minister Yair Lapid met yesterday but appeared no closer to resolving sharp disagreement over the 2015 budget.

Plans to present the annual budget to the cabinet and subsequently to the Knesset are behind schedule due to Operation Protective Edge. Factoring in the significant costs of the campaign and a subsequent demand to increase the defence budget has led to sharp contention between Netanyahu and Lapid. While Netanyahu favours greater defence spending and raised taxes to help cover the cost, Lapid is vehemently opposed to increasing taxes with the middle-class forming the base of his Yesh Atid party’s support. Instead, Lapid wants to increase the deficit to cover a more modest rise in the defence budget.

By law, if the budget is not approved by the end of March, then a general election will be held. According to Channel Two, yesterday’s meeting ended without resolution, but talks between the two will continue during the coming days.

The Finance Ministry yesterday said that it had set a budget deficit target of 3.18 percent of GDP in 2015, higher than an initial aim of 2.5 percent, to accommodate an increase in defence spending. The Bank of Israel Governor, Karnit Flug has advised that the deficit should not exceed 3 per cent. The Finance Ministry said yesterday that “in light of indications of slowdown of economic activity, it would not be right to raise taxes.” According to Ynet a Defence Ministry source called the proposed budget “completely unrealistic.”

Arguing his case for a sharp increase in defence spending, Netanyahu yesterday told a cyber-security conference that, “The billions we decided to invest in security over the past several years saved the Israeli economy.”

Despite the disagreement, Lapid told Channel Ten “I don’t see any reason to go to an election.” Commentators broadly agree that new elections would not favour either Netanyahu or Lapid and expect a budget agreement to be reached eventually.