Budget Crisis Paralyzes Israeli Government

The passage of Israel’s annual budget is traditionally a raucous event when the Knesset becomes a kind of Middle Eastern bazaar with government ministers locked in rounds of ritualized horse-trading and one-upmanship.

Typically just before New Year’s, eleventh-hour deals are struck with the prime minister, the votes are cast, and a budget is approved.

But this time, Prime Minister Benjamin Netanyahu’s fractious religious-right coalition has kept him in a chokehold long after midnight, paralyzing the government into the new year and threatening its ability to advance the key issue before it--peace with the Palestinians.

On Friday, Netanyahu still had no 1998 budget, no room to maneuver in peace negotiations and no more stability for a coalition government that seems to live in a perpetual state of crisis.

The latest upheaval was provoked by Foreign Minister David Levy, who threatened Thursday to quit his post over the budget and pull his five Gesher party members out of the government. Although this is Levy’s sixth resignation threat in the 18 months the government has been in power, and many suspect the theatrical politician of crying wolf, it seems to be his most serious.

After the announcement, Netanyahu put off a budget vote until at least Monday, giving him time to haggle with Levy, and asked U.S. peace envoy Dennis B. Ross to postpone a scheduled trip to talk about a further Israeli pullback from the West Bank.

The United States is urging Netanyahu to withdraw from at least 10% of the West Bank in the next redeployment and call a “time-out” on Jewish settlement construction there. Netanyahu, who faces strong opposition to this among coalition members, put the redeployment on hold in December to get through the budget fight first.

Now, he is struggling to appease Levy and pass the budget so that he can return to peace negotiations, where he will need Levy’s help against hard-liners who do not want to make any more territorial concessions. Levy has been a moderating force in the government, pushing for negotiations with the Palestinians.

“If Levy resigns, it kills the chances of a second redeployment,” said David Makovsky, diplomatic correspondent for the daily newspaper Haaretz. “Everything will be frozen but the settlements.”

Levy’s threat came after a week of unprecedented budget wrangling in which most members of the eight-party coalition managed to extract expensive goodies from Netanyahu, who had been trying to keep a lid on the budget.

Government ministers--all seeking to satisfy their own narrow constituencies of religious communities, Russian immigrants and settlers--failed to turn up for key votes, voted against Netanyahu and called for early elections in their efforts to pressure the prime minister. In the end, they got more money for yeshivas, immigrant mortgages, bypass roads in the West Bank and other interests, adding hundreds of millions of dollars to the $58-billion budget.

Netanyahu ignored his advisors’ warnings not to leave Levy for last and took his foreign minister’s vote for granted, but was surprised.

Complaining that Netanyahu had not kept the promises he made to Levy over the 1997 budget, the foreign minister said he would resign.

“I am not threatening anyone or playing political games,” Levy said. “Even if the law enables a vote against [the budget] while remaining in the government, I will not stay in this government.”

Levy said he wants more aid for Israel’s poor--mostly Sephardic Jews who make up the bulk of his constituency.

But Israeli political analysts speculated about what he really sought. The moral high ground over the religious Shas Party, which is eating into his constituency of underclasses? The chance to show up Netanyahu, a longtime rival with whom he is joined in what some Israeli political analysts call a “bad marriage”? The means to bring down a government moving too slowly, in his opinion, toward peacemaking?

“As long as I felt that I could influence the government’s policy, I could be part of this government. I have now realized that I can no longer exercise any influence,” Levy said.

*

Many people, including some in Netanyahu’s office, expect the two to cut a deal over the weekend. They say Levy’s demands will be met--even if it means the resignation of fiscally conservative Finance Minister Yaacov Neeman.

The first time Levy threatened to withdraw from the coalition was in June 1996 over Netanyahu’s intention to leave Likud Party stalwart Ariel Sharon out of the newly formed government. Netanyahu gave in and created the Ministry of Infrastructure for Sharon.

A year and several threats later, Levy again said he would quit over Sharon--this time because Netanyahu had included him in his “kitchen Cabinet.” Levy was also angry over Netanyahu’s social policies, which the prime minister promised to address.

After the Israeli intelligence agency’s bungled attempt to assassinate a Hamas political leader in the Jordanian capital of Amman in October, Levy complained that he had not been briefed ahead of the operation and said “the chances of my leaving [the government] are about 50-50.”

He stayed then, but some political analysts say there is a good chance he will leave the coalition this time because he is fed up with Netanyahu and the government’s inaction.

If he were to quit, Levy would not technically bring down the government, but withdrawing his five party members would leave Netanyahu with 61 seats in the 120-member Knesset--a majority of one.

*

But a more likely scenario is that Levy’s resignation would have a domino effect. It could end any hope of progress in the peace process, and that could prompt another moderate, Internal Security Minister Avigdor Kahalani, to pull his Third Way party out of the coalition. That would be enough to bring down the government.

By law, Netanyahu has an extended deadline of March 31 to pass the budget or face new elections, and he could hold off a vote until then. But this would put him in the very situation he was trying to avoid in the first place: Every effort to move forward on the peace process or anything else would be held hostage by coalition members threatening him on the budget.

To put off peace talks and the redeployment for another couple of months could be equally untenable.

The Clinton administration is growing impatient with Netanyahu’s delays. Palestinian frustrations over the stalled redeployment--originally scheduled for Sept. 7--are growing, increasing chances for unrest.

Meanwhile, Israeli and Palestinian extremists are already taking advantage of the current stagnation in the peace process to try to kill it.

In recent days, unknown gunmen presumed to be Palestinians shot and critically wounded an Israeli woman riding in a car on a West Bank road. Molotov cocktails were thrown at Israeli soldiers and civilian drivers throughout the West Bank and, on Friday, at a kindergarten in the Jewish settlement in Hebron.

At the same time, Israeli officials have arrested two right-wing extremists who allegedly were planning to catapult a pig’s head into a crowd of Muslim worshipers at Al Aqsa mosque, the third-holiest site in Islam.

Pork is forbidden by both Muslims and Jews. Such a desecration of a holy place could be interpreted by the Palestinians as an act of war.

Most Israelis view these plotters as a fringe group, but Palestinians see them as part of an overall Israeli scheme to take over the compound Jews believe to have been the site of their destroyed Second Temple. Meanwhile, Israelis shut down for the Jewish Sabbath, and Netanyahu’s negotiations with his finance minister and Levy’s camp were on hold until tonight.