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What happened: Finance Minister Yisrael Katz (Likud) said yesterday that he intends to bring a one-year budget (to the end of 2020) to cabinet next week, in contrast to the position of Blue and White and top Finance Ministry officials.

• A Blue and White source has told Israel Hayom, “We cannot agree to a situation in which there is a budget only for the High Holidays. The Israeli economy will not be able to recover without economic security for 2021.”
• This week Finance Ministry officials held a meeting to discuss the budget. Finance Ministry Budgets Department Director Shaul Meridor said the idea of a one-year budget is a “joke,” noting that the budget, even if submitted before the 25 August deadline, could only be passed at the end of October or the beginning of November, at a time when the Finance Ministry should be in the middle of finalising the 2021 budget.
• Meridor’s view is also shared by the majority of Israel’s top economists, including three Israel Prize laureates, who issued a joint statement saying that Israel needs a growth-promoting budget for 15 months, and not a one-year budget that will barely cover the last three months of 2020.
• Alternate Prime Minister Benny Gantz commented on the budget issue at the faction meeting this week and said: “We have to realize that holding a fourth election instead of passing a budget and creating stability is simply national irresponsibility and ignoring the wishes of the people. I refuse to believe that there is any person in the country who can imagine holding elections.”

Context: The new position of the top Finance Ministry officials will make it very hard for Netanyahu to explain why he is insisting on a one-year budget.

• Katz has been looking for a one year budget arguing that the coronavirus has made long term planning unrealistic at this stage.
• Netanyahu is suspected of supporting a one-year budget because it would leave him with the option of dismantling the coalition early next year and remain Prime Minister, before the alternating premiership arrangement could go into effect.
• Ma’ariv reported yesterday that the increasingly prevailing assessment within right-wing circles in light of the ongoing impasse about the budget is that Prime Minister Netanyahu intends to dismantle the unity government.
• The ultra-Orthodox parties are pushing both sides to reach a compromise as they want a budget to secure funding for their religious communities and schools. Shas leader Aryeh Deri met on Wednesday in the Knesset with Blue and White and Likud members to try and find a compromise, but no agreement has been reached yet.
• Netanyahu maintains a sizable lead over any other challenger and it will be difficult to topple him in elections. A new poll in Israel Hayom shows that if elections were held now, the Likud is projected to get 33 seats, versus 17 for Yesh Atid-Telem, 16 for the Joint List, 12 each for Blue and White and Yamina, 9 for Shas, and 8 each for UTJ and Yisrael Beiteinu. The right-wing/ultra-Orthodox bloc would win a 62-seat majority.
• Tensions are also mounting within the Likud, after Likud MK Yifat Shasha-Biton was fired earlier this week as chairwoman of the Knesset’s Coronavirus Committee. Prime Minister Netanyahu reportedly supported coalition Chairman Miki Zohar’s decision to punish Shasha-Biton after her committee reversed several social distancing plans approved by the government. After the sacking, Netanyahu had to intervene to stop Likud MK Shlomo Karai’s initiative to collect signatures from Likud colleagues to oust Zohar as coalition chairman.

Looking ahead: The budget issue is not included in the agenda for Sunday’s cabinet meeting, but Katz warned that the delay in passing a budget bill could cause Israel to go to “unnecessary elections”.

• If the Knesset does not pass a budget by 25 August, or amend the law to allow for an extension, the Knesset will automatically dissolve and elections will be held in November time. As stated in the coalition agreement, Netanyahu would continue as interim Prime Minister.