Updated: Mon, 13 May 2013 19:08:36 GMT | By Agence France-Presse

Israel trims defence spending in austerity budget

Israel's cabinet was meeting late into the night on Monday to thrash out details of an unpopular austerity budget, after unanimously agreeing to impose spending cuts on a reluctant defence establishment.


At 3.0 billion shekels ($840.73 billion, 648 million euros) the defence cuts were one billion shekels less than those sought by Finance Minister Yair Lapid, and a small part of what is still likely to be a military bill of about 56 billion shekels.

Defence chiefs had lobbied hard against the measures, warning politicians they would bear the responsibility if they undermined the ability of security-conscious Israel to defend itself.

Still to be decided by ministers on Monday were proposals to slash spending across the board, including on family allowances, a move which enraged parties representing ultra-Orthodox Jews, who traditionally have lower incomes and larger families.

"Perhaps the benefits are pocket money for many higher-income families and they do not even know how much they are getting, but for most Israelis, child support is part of their monthly income," Shas party leader Aryeh Deri told parliament according to news website Ynet.

He was speaking in support of one of five opposition no-confidence motions in the government's economic plans, all of which were easily defeated.

With public opposition mounting and the budget, even if approved by the cabinet as expected, still to win approval from parliament, the finance ministry was at pains to deny reports it planned to impose property tax on cemetery plots.

"There is no truth in reports that taxes will be required on graves," it said on Facebook.

Prime Minister Benjamin Netanyahu backed Lapid's drive to reduce a burgeoning budget deficit but said cuts to the military needed "balance".

"We need the IDF (Israel Defence Forces) to continue its process of streamlining, but we also need more Iron Domes," he told ministers, referring to the country's vaunted missile defence batteries.

"I believe the way I am proposing today provides the correct balance between security needs and the needs of the economy."

Netanyahu himself has been pilloried in the media over reports that despite the austerity campaign he ordered a double bed installed on his chartered plane for the five-hour flight to London last month to attend the funeral of former British premier Margaret Thatcher, at a cost of 127,000 dollars.

His office has said he was unaware of the cost and has since ordered that no beds be installed on future short-haul flights, but media have revelled in the story, calling it "bedgate".

Lapid, in office for less than two months, demanded defence cuts to help plug a budget deficit expected to be capped at 4.65 percent of gross domestic product this year and three percent in 2014.

His proposals, which have already sparked mass public protest, include an increase of 1.5 percentage points in personal income tax, one point in corporate tax and a one-point rise in VAT in addition to the spending cuts.

On Saturday, thousands took to the streets of Israel's main cities to demonstrate against Lapid's plans in an echo of the mass cost-of-living protests which swept the country in 2011.

Further demonstrations are planned for later this week.

Outside Netanyahu's office, where the cabinet meeting was being held, hundreds of people protested over Lapid's plans to eliminate the VAT exemption currently enjoyed by the tourism sector, saying it would strike a blow to an industry that employs 200,000.

Netanyahu said he expected his 21-member cabinet to approve the full package at Monday's marathon sitting.

"We will do this today and by the end of the day, Israel will have a budget," Netanyahu said as the meeting got under way.

It must be submitted to parliament by June 10 and passed into law by July 30.

Lapid has warned that if the defence cuts are not approved, the axe will fall on health, education and social spending.

The former TV anchor shot to prominence in a January election at the helm of his newly formed Yesh Atid party by tapping into middle class grievances over the cost of living and social injustice.

The centrist party proved the surprise package of the election, becoming the second-largest in parliament and a key partner in Netanyahu's governing coalition.

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