On Sunday morning, Israel’s finance minister, Yair Lapid, a member of the Security Cabinet and head of the Yesh Atid party, gave a press briefing. It was supposed to be about the impact of Operation Protective Edge on Israel’s economy. But questions about the State of Israel’s finances were not asked by any of the reporters of the major or minor news outlets present.
Instead, after a brief economic report from a government press office functionary, Lapid said that he is calling for a Middle-East diplomatic conference before the September 22 Donor Conference that will determine how to give aid to Gazans and who will monitor all aspects of that repair and restoration. There are reports that more than 30 percent of Gazans have been left homeless.
The government spokesman said Protective Edge created political and economical challenges for Israel. “The fighting affected not only the people’s daily lives but their financial stability, especially in the south of Israel,” and that this would have severe affects in the next fiscal year’s budget. He said this was the longest war Israel has fought since its War of Independence in 1948.
According to Bloomberg News, Israel’s growth had been slowing and showed growth of only 1.7 percent, down from the previous quarter’s 2.8 percent. The Bank of Israel reduced the benchmark interest rate to a record low of.25 percent. One reporter asked about “an open public battle” between Lapid and Karnit percent, across-the-board cut in most ministry budgets to help finance the war costs and rehabilitate towns near the Gaza border.
However, opposition leader Yitzhak Herzog of Labor said that Prime Minister Binyamin Netanyahu and Lapid are ripping apart the delicate fabric of Israeli society, as ministers authorized budget the other.”
Lapid said that been a week since the long term cease-fire began, “Operation Protective Edge is not over,” and that it is just the beginning of the next stage, “the diplomatic stage that must lead to the demilitarization of the Gaza strip.”
During Operation Protective Edge, Israel destroyed more than 30 tunnels, rocket launchers, production facilities and terrorist infrastructure. “We targeted and eliminated hundreds of Hamas and Islamic Jihad terrorists including senior leaders.”
As to the cease-fire, Lapid said, “We cannot and will not allow a situation whereby this cease-fire is the beginning of the countdown to the next round of fire. If we don’t take the diplomatic initiative, this is exactly what will happen.
“Israel must act before that to avoid a conference where Gaza gets support and Israel gets nothing.” Lapid said a regional conference is needed with the Egyptians, the Saudis and the Gulf States and representatives of the quartet. (United Nations, United States, European Union and Russia) to insure that demilitarization will take place alongside rehabilitation. And that that meeting must take place before the Donor Conference on September 22.
Asked what incentive Hamas has to agree to demilitarization, Lapid said, “It’s the rehabilitation of Gaza. If they love their children they want to see Gaza rehabilitated and rebuilt. But this can not come for free. They are the cause of the destruction of Gaza and they should pay the price for the rehabilitation and rebuilding of Gaza and the price is demilitarization.”
He said this is what Israel is pushing for. “The official policy of the State of Israel and the government of Israel is you can not have schools and hospitals built and then use them as terror bases.”
Discussing this before the Donors’ Conference would provide the framework for a wider approach taking advantage of the changes in the region. He said he’s discussed this with Netanyahu and the German Foreign Minister (Frank-Walter) Steinmeier and he has a meeting next week with the Norwegian Foreign Minister (Borge Brende). “Norway is the head of the Donors Conference.” He said they were all positive about the idea.
“The threat of terror is a common threat to the entire Western world. As the Islamic State continues to march through Iraq and Syria, the world understands that we face an ideology committed to death and destruction; an ideology of brutality towards non- Muslims and towards anyone they see as the wrong type of a Muslim. That is Hamas as well.”
Lapid said, “Now comes the bill for 50 days of fighting.”
According to Haaretz, defense officials estimated it cost Israel $60 million a day and news media estimates the cost of the war surpassed $2.5 billion after 41 days but that the daily cost dropped once Israel’s troops withdrew from Gaza. These figures include estimates of cost of repairing damaged military systems, as well as caring for the wounded and the families of soldiers who died in battle (70 as of Sunday morning.) These figures do not include the cost of pulling from the reserve units, 60,000, called up costing about 500 INS (Israeli New Shekel) a day per reservist or coming to a total of about $8.4 million. As to future spending, Haaretz reported that the army had demanded an extra 10 billion NIS ($2.8 billion) in the 2015 budget bringing its budget to 62 billion NIS or $72 billion for the year.
Lapid said, “The IDF needs to restock and we will not spare one shekel when it comes to the security of the soldiers and the citizens of Israel.”
He said the communities around the Gaza strip and throughout the Israeli south must also be supported. “They need to rebuild their lives and rebuild their homes.”
At the same time there are concerns that tax revenues will be smaller as the economy slows. In order to supply the IDF’s needs, Haaretz said Finance Ministry sources said cuts would be made in education, health care, welfare and infrastructure because there are no reserves in the budget.
How those will play out against a Holocaust survivors’ program announced earlier this year by Netanyahu and initiated by Lapid when he came to office, that $1 billion NIS ($286,894,000) would be distributed to the 50,000 Holocaust survivors subsisting under the poverty level in Israel. This was despite a high deficit when he came to the office in 2012.
“It took some very painful measures, some politically painful to me, in order to lower the budget. One of the reasons we entered this operation with the ability to absorb expenses during the 2014 fiscal year is because we took those measures and we were prepared and we had some room even under the budget we were allowed to have.”
While Lapid said the deficit would increase slightly he would not give a figure. However media reports have it at about 3.5% in a $111.8 billion budget for 2014. (The 2014 budget for the United States was $3.77 trillion in expenditures with a deficit of about 13%).
At the press briefing Lapid said, “Despite the financial burden, we will be able to bear most of the costs of the operation within the 2014 budget. Israel’s economy is strong and it is robust. Our currency is still strong and our investments are still strong.”
He said there will be a small decrease in growth due to Operation Protective Edge, especially because of the impact on tourism, which media reports estimate to be in the area of a $2.6 billion loss. Lapid said that tourism high season in Israel is October and May, not July or August and so there is hope for a quick rebound and the government will be pro-active in boosting Israeli tourism. (According to media reports tour operator groups estimate that organized tours will lose $350 million from July through December and $375 million will be lost by the hotel industry according to the Israel Hotel Association.)
Lapid said, “Experience shows us that the growth will return and return quickly and strongly…the most Zionist act the Jewish Community around the world can do today is to book a holiday and come spend the High Holy days in Israel.”
By Anne Phyllis Pinzow
