Some Phones Cut Off; Eggs May Go Too : Israeli Military Short of Cash in Budget Crunch

Economist Zvi Tropp has worked at Israel’s Defense Ministry for 10 years, and he says he cannot remember a time when there was so much pressure on the budget as there is today.

Cash is so scarce that the ministry is at least $75 million behind in payments to firms that supply it with everything from bread to binoculars.

On Friday, the Ministry of Communications cut off 1,000 Defense Ministry telephones for non-payment of bills, and by Sunday the army will be threatened with a cutoff of bread, milk, chicken and egg deliveries.

Having no eggs could be particularly annoying. Only last week the army introduced meatless Wednesdays to save money. It promised omelets instead.

The other day, Israel’s pharmacists stopped supplying medicine to disabled veterans, and now truckers are threatening to cut off service to the Defense Ministry, all for non-payment of bills.

The Treasury has agreed to release enough money Sunday to enable the Defense Ministry to at least satisfy its most important suppliers, but the army’s financial woes are indicative of the kind of budget problems that Defense Minister Yitzhak Rabin will take with him to Washington, where he is to open talks Monday with officials of the Reagan Administration.

High on the agenda will be what Rabin has described as the largest defense cuts in more than 30 years.

Some of the rhetoric and a few of the horror stories making their way into print here are no doubt part of the usual competition among government ministries for budget dollars. Also, Rabin will want to justify Israel’s request for a sharp increase in American military aid as part of $5 billion in total U.S. assistance it seeks over the next 20 months.

Still, it is clear that Israel’s overall economic crisis is reflected in the problems of its largest ministry.

Israel spends an estimated $5.5 billion a year on the military, nearly a fourth of its gross national product. Per-capita military outlays here are larger than those in the United States.

The assumption here is that Israel must be strong enough to discourage an attack by any combination of the Arab countries that surround it. The task, Israeli officials say, is growing more difficult.

A massive resupply effort by the Soviet Union has provided Syria, the most hostile of Israel’s neighbors, with increasingly sophisticated weapons. Israel, since it cannot compete with the surrounding Arab countries in numbers of soldiers, tanks, and airplanes, sees its only option as maintaining a technological edge, and this is expensive.

The war in Lebanon has not helped. It has cost $3 billion since it began in June, 1982, and the bill goes up by about $1 million a day as long as Israeli troops are north of the border, according to senior military officials. The planned withdrawal of Israeli troops from Lebanon will eventually take some pressure off the defense budget, but in the short term it will increase costs, those officials say.

The Israeli press reported Friday that Rabin and Finance Minister Yitzhak Modai have agreed on a 1985 budget that appears on the surface to be $500 million below last year’s budget. But on top of the normal budget, the Treasury will finance the cost of the Lebanon operation, including the withdrawal, as a separate item.

Also, Rabin said in a telephone interview, Israel hopes for a large enough increase in American military aid to all but make up for the budget cut. Israel argues that it offers Washington a relatively inexpensive strategic asset in the Mideast, often comparing its aid requests with the money the United States spends to support the North Atlantic Treaty Organization.

Region’s Best Army

Even with more American military aid, however, the Israeli army, which is generally accepted as the Mideast’s best, is likely to be adversely affected by the current economic crisis.

Among other things, defense sources say, Israeli soldiers will be expected to use their uniforms longer. Also, the Defense Ministry economist Tropp said, there are plans to reduce training hours and cut building programs. Other projects will be postponed.

Some see as a prime target for budget-cutting Israel’s program to design and build a new jet fighter called the Lavi. The project is expected to cost more than $10 billion.

Defense Secretary Caspar W. Weinberger, whom Rabin will meet Monday, is reportedly one of those who thinks Israel would be better off scrapping the Lavi and purchasing American aircraft.

Northrop Corp. has tried to convince Israel to buy its F-20 fighter and has even offered to build it in Israel. Rabin is expected to talk with Northrop officials during his U.S. visit.

The Lavi project has already cost more than $800 million. Also, 3,000 Israelis are employed on the project, and Rabin said in the interview that government officials have given no thought to canceling it.