Netanyahu’s Budget Riles Left, Threatens Unity Talks


By Ofer Shelah

Published August 13, 2004, issue of August 13, 2004.
  • Print
  • Share Share

TEL AVIV — Benjamin Netanyahu, the spoiler of Ariel Sharon’s Cabinet, managed this week to throw Israeli politics into turmoil by pulling one of his most unexpected stunts ever: bringing in a 2005 state budget framework on time.

Netanyahu’s draft budget, a Thatcherite mix of privatization and spending cuts, is winning plaudits from economists and business leaders for its tough-mindedness. Its centerpiece is $1.3 billion in government spending cuts, designed to shore up Israel’s credit rating by holding the deficit below 3% of GDP.

Its chances of enactment, however, are growing slimmer by the day. Critics on the left — including liberals within Netanyahu’s own Likud party — are attacking it as draconian and socially divisive. More important, the Labor Party is threatening to call off talks over entering a unity government unless the budget is put on hold. That could scotch Sharon’s hopes of broadening his minority coalition, stall the Gaza disengagement plan and force new elections.

Critics say that this is precisely what Netanyahu has in mind. By presenting a budget that Labor cannot accept without alienating key constituencies — and by presenting it for Cabinet approval now, while coalition negotiations are in full swing — Netanyahu hopes to undercut Sharon and eventually bring him down, offering himself as the successor.

Labor leaders spelled out that scenario this week, after Likud negotiators rejected their proposal to reopen budget talks once Labor enters the coalition. The Cabinet is currently due to vote on the budget this coming Sunday, August 15.

“I’m very pessimistic,” Labor negotiator Binyamin Ben-Eliezer told reporters Tuesday. “I think Bibi [Netanyahu] is trying to make it difficult for Labor. And the toughening of the position of the Likud narrows the chance that we will join [the coalition]. This is precisely what Bibi wants; we are being used.”

Netanyahu denied that the budget proposal was intended to push out Labor. His goal, he said, is “to pull our economic wagon out of the mud.” As frequently happens with Netanyahu, however, almost nobody believed him.

The current coalition crisis is unusual in several respects, not least the fact that it centers on economics, which rarely plays any major role in coalition talks. Traditionally, the Finance Ministry remains under the control of the prime minister’s party, and smaller parties limit their demands to their own sectoral interests, avoiding debate on the larger issues.

The difference in the current negotiations stems from the fact that security and the future of the territories, usually the main bones of contention, are the issues least in dispute this time. The only reason that Sharon wants to reshuffle his coalition — and the only declared reason for Labor to join him — is to ensure the implementation of his Gaza disengagement plan. Therefore, economics have become the battleground for political positioning. And everybody is joining the fray.

Netanyahu, for his part, is playing a role he never expected to play. He became finance minister only reluctantly, forced into the post after the 2003 elections by Sharon, his longtime political rival. Saddled with a job commonly regarded as a political graveyard, Netanyahu performed what is widely considered a miracle, turning around a troubling economy while boosting his personal popularity. Acting on his own deeply held economic beliefs, Netanyahu implemented an Israeli version of Reaganomics or, more precisely, Thatcherism: sharp budget cuts, mostly in welfare, unemployment and aid to the elderly; minor but politically significant tax cuts, and a strong focus on privatization and reducing the public sector. “The private sector is like a thin man carrying a fat man (the public sector) on his back,” Netanyahu declared at the time.

Politically, the climate was just right. The ultra-Orthodox parties, Shas and United Torah Judaism, were out of government and unable to press their constituents’ considerable demands. Shinui, the Likud’s biggest coalition partner, had become a 15-seat mini-power after the elections by mining the same sentiment Netanyahu was tapping: the rage of middle-class Israelis, who feel they are carrying others — the poor, the ultra-Orthodox, the Arabs — on their backs.

With loyal backing from Sharon and the opposition all but silenced, the road was open for Netanyahu to fulfill his vision. In the process he paradoxically became a favorite of the very groups that had worked hardest to unseat him as prime minister just four years earlier.

For historical and social reasons, Israel’s economic elites are usually identified with the left — that is, with those who favor trading territories for peace — while the have-nots, except for Israeli Arabs, favor the right. Netanyahu rose to power in 1996 on the wings of a “coalition of the outcast,” meaning the culturally and economically disenfranchised. But once in office, he quickly learned just how much power the old elites still retain. They mobilized behind Ehud Barak, whose main promise was to be different from Netanyahu, and ousted Netanyahu after barely three years in office.

Netanyahu is nothing if not a canny politician. As finance minister, he has carried the banners of the people who dethroned him in 1999. With Labor and Shinui fighting for the same electorate, and no real counterweight in sight, he took credit for the change of fortune in the Israeli economy: Last year there was positive economic growth, for the first time since 2000; it is expected to be anywhere between 2.5% and 3.5% this year. The shekel is strong and stable, inflation almost nonexistent.

The growth has not translated into jobs, and the unemployed currently number close to 290,000, or 10.8% of the working force. Netanyahu’s measures have taken their toll on the poor, as well. But the major parties offer these groups little more than lip-service: Labor Chairman Shimon Peres last week called Netanyahu’s policies “swinish capitalism,” but in the current coalition talks he has shown no interest in taking on the Treasury himself, insisting on receiving the Foreign Ministry.

The only person to offer an alternative is, perhaps not surprisingly, a rival from within Netanyahu’s own Likud party. Ehud Olmert, Sharon’s closest ally, attacked the finance minister (who, needless to say, is the greatest threat to both the prime minister and Olmert himself) in terms that few opposition leaders have dared to use. Netanyahu, Olmert declared this week, “has created two states — the haves and the have-nots.” To back up his words, Olmert is offering his own version of an economic plan. Netanyahu, not surprisingly, has rejected it.

Find us on Facebook!
  • Jon Stewart responds to his critics: “Look, obviously there are many strong opinions on this. But just merely mentioning Israel or questioning in any way the effectiveness or humanity of Israel’s policies is not the same thing as being pro-Hamas.”
  • "My bat mitzvah party took place in our living room. There were only a few Jewish kids there, and only one from my Sunday school class. She sat in the corner, wearing the right clothes, asking her mom when they could go." The latest in our Promised Lands series — what state should we visit next?
  • Former Israeli National Security Advisor Yaakov Amidror: “A cease-fire will mean that anytime Hamas wants to fight it can. Occupation of Gaza will bring longer-term quiet, but the price will be very high.” What do you think?
  • Should couples sign a pre-pregnancy contract, outlining how caring for the infant will be equally divided between the two parties involved? Just think of it as a ketubah for expectant parents:
  • Many #Israelis can't make it to bomb shelters in time. One of them is Amos Oz.
  • According to Israeli professor Mordechai Kedar, “the only thing that can deter terrorists, like those who kidnapped the children and killed them, is the knowledge that their sister or their mother will be raped."
  • Why does ultra-Orthodox group Agudath Israel of America receive its largest donation from the majority owners of Walmart? Find out here:
  • Woody Allen on the situation in #Gaza: It's “a terrible, tragic thing. Innocent lives are lost left and right, and it’s a horrible situation that eventually has to right itself.”
  • "Mark your calendars: It was on Sunday, July 20, that the momentum turned against Israel." J.J. Goldberg's latest analysis on Israel's ground operation in Gaza:
  • What do you think?
  • "To everyone who is reading this article and saying, “Yes, but… Hamas,” I would ask you to just stop with the “buts.” Take a single moment and allow yourself to feel this tremendous loss. Lay down your arms and grieve for the children of Gaza."
  • Professor Dan Markel, 41 years old, was found shot and killed in his Tallahassee home on Friday. Jay Michaelson can't explain the death, just grieve for it.
  • Employees complained that the food they received to end the daily fast during the holy month of Ramadan was not enough (no non-kosher food is allowed in the plant). The next day, they were dismissed.
  • Why are peace activists getting beat up in Tel Aviv?
  • Backstreet's...not back.
  • from-cache

Would you like to receive updates about new stories?

We will not share your e-mail address or other personal information.

Already subscribed? Manage your subscription.