Avigdor Lieberman has been called “kingmaker” when it comes to coalition-building, refusing to ally his secular nationalist party with Haredi parties and almost toppling Netanyahu in the Israel’s third elections. Now, in his current role of Minister of Finance, he is exercising his power in a different direction.
Lieberman’s Yisrael Beiteinu party holds unprecedented control of economic decision making, allowing almost total freedom to the Ministry of Finance to push forward a series of controversial reforms. These reforms, many of which have been consistently blocked in recent years, indicate that it is acting in a vacuum, without any voices of restraint or opposition.
In contrast to the public spats and high tensions between Finance Ministry officials and former Ministers of Finance Katz and Kahlon, Lieberman seems to be entirely aligned with most high ranking Ministry of Finance’s officials' worldview.
He also has one additional advantage in that his party controls the Knesset’s Finance Committee, with Alex Kushner at its head. With this assurance of support, Lieberman appears to have given the green light to the Ministry of Finance to execute a range of reforms which have been previously blocked by committee heads.
Now, Lieberman is attempting to found a new committee called the Reform Committee, which will be headed by another member of his party, Yulia Melinkovski. The committee is intended to debate some of the more controversial reforms in the 2022 budget, which would fast-track them for approval. For now, this initiative has been blocked by Minister of Defense Benny Gantz.
Last week, the agricultural industry found out that one of the reforms contained a clause which would remove all protective import taxes. Both the farmers and officials from the Ministry of Agriculture, learned the details of this dramatic reform from the press, as the Finance Ministry did not bother to inform them.
The reform in agricultural protective taxes is just one of the reforms which are being pushed without public debate, and without consulting the relevant officials. Removing import taxes has long term consequences, but has been decided without discussion, along with the privatization of the postal service, raising the retirement age and removing price controls on bread.
All of this has been done over the Ministers’ heads, and without advising with think tanks or civilian organizations. Evidently, the Ministry of Finance believes that they know best, and can speak for all parts of the government. Most of the reforms are designed to solve real problems, but only according to the Ministry of Finance’s specific worldview – by reducing government intervention in the market.
Lieberman and his party seem to be aligned with the Ministry’s stance when it comes to the budget as well.
“The budget deficit is spiraling out of control, we can’t go on like this,” Kushner said in a radio interview last week. The Minister has also repeated a similar message again and again over the past few months, despite the fact that the deficit is falling this year, and the fact that both the International Monetary Fund and the OECD have recommended keeping high levels of deficit to fund government investment.
According to a slideshow which the Ministry of Finance presented to members of the coalition, the total budget is expected to total 449 billion shekels, without the fiscal stimulus suggested by the Bank of Israel, and without additional aid to address COVID-19.
This means that the Ministry is effectively ending the pandemic economic plan, and resuming the efforts to reach a 60 percent debt to GDP ratio. The Bank of Israel has recommended investing 3.3 percent of GDP (43 billion shekels) every year and stabilizing the debt to GDP ratio at about 80 percent.
The two most dramatic decisions the new government will make are the size of the budget and the reforms it will include. These decisions are currently being made by officials with free rein and full backing by Lieberman. The question remains whether the decisions will be made unilaterally or whether the coalition parties that hold different stances will also weigh in.