The political and economic systems in Israel were all riled up last month because of two, seemingly unrelated, events. The first to make headlines was the well-covered dispute between former Prime Minister Ehud Olmert and current Prime Minister Benjamin Netanyahu over the tremendous expenditures of the Israeli defense establishment to prepare itself for a military conflict with Iran and the threat posed by the Iranian nuclear program.

The second event that caused an uproar was the publication of Israel’s 2012 national deficit, which reached a record high of NIS 39 billion [around $10 billion] — far exceeding the forecasts and estimates (to be precise: NIS 18.5 billion [$5 billion] over the forecast).

The first task the new government will be charged with — regardless of its composition – will be the approval of the 2013 national budget. Because of the aforementioned deficit generated in 2012, the budget will include painful cuts, and one of them, this time, is supposed to be in defense. Without scaling back the defense budget, it is difficult to see how the overall budget can be passed. This time, as opposed to the past, the potential players in the future government include many who believe that the time for such a step is long overdue — regardless of whether there is an Iranian threat. If this actually does happen, it will mark the first time since the Rabin government in the 1990s that the defense budget will be put on the table for serious discussion and have to absorb major cutbacks. “Serious discussion” and “major cutbacks” are the two very things recent Israeli governments have refrained from doing.

If we discuss the two issues mentioned at the beginning in depth, we will be able to understand how Israeli governments have historically acted specifically to economic and defense matters, but also in general when it comes to setting strategy and defining long-term objectives.