As chair of the Yisrael Beitenu party, one of Avigdor Liberman’s demands for joining the new coalition was that it does not include the ultra-Orthodox parties. Liberman was largely responsible for Prime Minister Benjamin Netanyahu’s failure to form a coalition after the first round of elections two years ago. Already back then, forming a government without the ultra-Orthodox was a banner issue for Liberman. The same is true now. After the most recent election in March, he fought tooth and nail against efforts by Yamina leader Naftali Bennett and especially New Hope party leader Gideon Saar to include the ultra-Orthodox into the new coalition. In the end, Liberman got what he wanted, at least for the moment.
As a first step for distancing the ultra-Orthodox, Liberman introduced several clauses into the coalition agreement, realizing that the ultra-Orthodox parties would deem them problematic. These included a requirement for ultra-Orthodox schools supported by the state to teach a core curriculum (English, math and sciences); the operation of public transportation and the opening of supermarkets on the Sabbath; support for the Western Wall agreement, which would create an official space for Reform and Conservative Jews to pray at the holiest site to the Jewish people; an easing of the conversion process; and the elimination of the ultra-Orthodox monopoly over kosher food supervision.
While all of this is disturbing to the ultra-Orthodox parties, what bothers them most is Liberman’s control of the Israeli economy in the new coalition. He will be appointed finance minister, two other economic ministers will be approved by him and the chairman of the powerful Knesset Finance Committee will be a member of his Yisrael Beitenu party.
Former Knesset member Haim Oron of Meretz told Al-Monitor that Liberman’s dominance of the economic sector is a serious problem. “If the chairman of the [Finance] Committee is a peon of the finance minister, the Knesset will be unable to fulfill its most basic task of providing oversight to the government and taking it to task when necessary. Over the last few years, the committee has been subjected to extortion. Everyone, from every party, including the ruling party, cajoled it to get what it wanted. If the committee chair is a ‘yes-man’ of the new minister, the committee’s role in providing oversight and pressuring the Knesset to act appropriately — both necessary for a parliamentary system to function — will be lost entirely.’’
One of the greatest concerns of the ultra-Orthodox parties is that Liberman will slash the budgets of ultra-Orthodox yeshivas. These budgets are what allow young ultra-Orthodox men to stay out of the workforce and support themselves and their families with government handouts. A similar situation occurred when Yair Lapid of Yesh Atid served as finance minister in the 2013-15 government. As a result of policies, employment figures for ultra-Orthodox men rose from about 40% to over 50% by 2016, a statistic bemoaned by the ultra-Orthodox leadership. It was only after Netanyahu formed a new government with the ultra-Orthodox in 2015 and budgets for yeshivas were restored to previous levels that the rise in ultra-Orthodox employment was blocked.
The incoming finance minister gave almost no interviews in the last few weeks, once it seemed likely that a Lapid-Bennett government would be formed. He did, however, share some of his plans with Al-Monitor, saying, “This coalition will focus mainly on economic issues. Israel hasn’t had a budget for two years now. We see the unemployment figures rising, along with the deficit and debt-to-GDP ratio, and realize that the biggest challenge we now face is finding ways to restore the economy. For the deficit to go from 2.5% to 11.6%, which is where it is now, is completely unreasonable."
He added, “Israel’s national debt now stands at about 1 trillion shekels [$308 million]. This comes to approximately 100,000 shekels [$30,800] per person, which someone will eventually have to pay. Israel must increase economic growth. To achieve this, it must increase its budget without increasing its deficit. When I become finance minister, I will call the governor of the Bank of Israel, the president of the Manufacturers Association and the chairman of the Histadrut labor union and get them talking to us. Raising taxes is ineffective. Placing the burden on people who actually work is unwise, not to mention insufficient. We need to come up with a comprehensive plan that deals with all of the components, including revenues, taxes and employment.”
Responding to questions about the Finance Committee, he said, “In order to take big steps forward, we have to keep the entire package, meaning both the Finance Ministry and the Finance Committee, under a single umbrella. The economic challenge is the most important challenge facing this government. It has always been that way. When Netanyahu implemented major policy decisions during his time as finance minister, he demanded that [Avraham] Hirschson, a member of the Likud, would be chair of the Finance Committee.”
Liberman says that he has no plans to increase the deficit to fund the budget, despite its pressing needs, and believes the key is to create growth and increase employment. He opposes raising taxes, and told his faction last week, “We have reached an absurd situation. Just 20% of the populations pays 91%-92% of all taxes, with most hired workers not meeting the tax threshold.”
He then added, “What is the first thing I will do as finance minister? I will ask all the prosperous factories and companies what they can do to add 100 new jobs. What do they need to do that? What obstacles do they face? I’ve already met with several corporations, and they’ve told me about all sorts of obstacles. If a company could add 100 new jobs, were it not for regulatory issues, we will solve that problem for them.”
He also plans to pass a two-year budget that would cover the period up to the end of 2022, without raising taxes, while investing tens of billions of shekels in national infrastructure projects. In this, he is reminiscent of US President Joe Biden, who wants to pour vast sums into the American infrastructure. It is a common measure taken by countries that are coming out of a crisis. Investment in national projects pours money into the economy and creates jobs, and it comes at a lower cost when done in partnership with the private sector.
On the other hand, it is not at all clear how Liberman will avoid increasing the deficit while spending vast sums, without raising taxes or cutting into the budgets of the various ministries. One particularly important problem he will face is the defense budget, which now stands at $70 billion, with the Israel Defense Forces (IDF) asking for an increase as a result of Operation Guardian of the Walls. As a former defense minister, Liberman will have a hard time withstanding the IDF’s demand, but it is unclear how he will find funding, if he does agree to increase the defense budget.
The job of finance minister has always been complicated. Now, after two years without any budget, and with a government consisting of many different parties with competing ideologies, the problems are only exacerbated. In addition, as head of a relatively small party, Liberman will need to justify his “tough-guy” image and assert his reputation as one of Israel’s most experienced politicians.