Election turmoil plunges Israel into budget crisis

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Israeli Prime Minister Benjamin Netanyahu speaks during a meeting of the right-wing bloc at the Knesset (Israeli parliament) in Jerusalem on November 20, 2019. (AFP)
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Israeli Kahol Lavan (Blue and White) political alliance leader and retired General Benny Gantz, gives a statement ahead of a midnight deadline in the coastal city of Tel Aviv on November 20, 2019.(AFP)
Updated 21 November 2019

Election turmoil plunges Israel into budget crisis

  • Israel's political stalemate has lasted a year
  • No state budget means no new spending in 2020

JERUSALEM: With the prospect of a third election in Israel in less than a year, it will be well into 2020 before a new budget is passed, triggering months of cutbacks that will weigh on economic growth.
The Israeli economy has so far weathered two inconclusive ballots and a year of successive caretaker governments that were restricted from making any big decisions, from tax reforms to court appointments.
But it cannot escape the impact of no budget. Government ministries will automatically revert to their 2019 monthly allocations without an increase, making it harder to commission new roads, pay contractors and cover a growing deficit.
"Coping with it will not only affect government offices, but also the entire economy," the accountant general told a concerned parliamentary finance committee this week.
He offered the gloomy outlook as it became clear that neither Prime Minister Benjamin Netanyahu nor his rival, Benny Gantz, had enough support in parliament to form a government.
With both politicians coming up short, there now begins a 21-day period in which Israeli lawmakers can nominate any one of the Knesset's 120 lawmakers to try and establish a coalition.
If that fails too, an election is triggered within 90 days, raising the prospect for a weary electorate of going back to the polls after votes in April and September.
"There is absolute chaos in all the government ministries. That's what happens when you don't have a budget. And if they really do announce elections - it becomes a nightmare," said Amir Fuchs, a legal expert at the Israel Democracy Institute.
Defence contractors are already seeing government payments being frozen, according to an industry source. New road and rail projects, critical to ease traffic congestion, are expected to be put on hold.
"Purchases by ministries will all slow and some will even come to a halt," said Jonathan Katz, Leader Capital Markets' chief economist.

LOST OPPORTUNITIES
Uncertainty aside, the shekel remains one of the strongest currencies in the world and economic growth was a robust 4.1% in the third quarter, initial estimates showed this week. But risks have grown over the past year.
Israel's budget deficit is projected to swell to close to 4% in 2019 from 2.9% in 2018, and new taxes and spending cuts are needed to rein it in before it impacts the country's credit rating.
Government officials promised to boost investments in public transport and competition in the workforce to keep steam in the economy, but most plans have come to a standstill.
"The main issue is that of lost opportunities. More specifically, the opportunity to make much needed structural changes in the economy," said Bank Leumi chief economist Gil Bufman.
The OECD on Thursday cut its economic growth forecast for Israel to 2.9% in 2020, from a previous estimate of 3.3%, and forecast a similar rate in 2021.
It blamed the global slowdown, but also noted that "intensifying structural reforms...is crucial to lower the large social disparities and boost productivity".
The OECD also called for tax reform to increase revenue, something impossible without a government in place.
The Bank of Israel is expected to cut its key interest rate next week for the first time since 2015, with most economists polled by Reuters citing the global slowdown and an over-appreciation in the shekel.

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Egypt army drill ‘sends a message to Erdogan’

Updated 44 min 15 sec ago

Egypt army drill ‘sends a message to Erdogan’

  • Military exercise near Libyan border a ‘warning shot,’ experts say

CAIRO: A major Egyptian army exercise near the border with Libya is being viewed by military and strategic experts as a message of deterrence to Turkish President Recep Tayyip Erdogan over his backing for the Government of National Accord led by Prime Minister Fayez Al-Sarraj and supported by militia groups.

The combat exercise, codenamed “Hasm 2020” (Firmness 2020), was carried out by Egypt’s Western Region units together with armed forces formations and special troops, including paratroops and SEAL teams.

The drills included strategic incursions by land forces and land-sea operations by troops in coastal areas of the Western Region near the border with Libya. Other exercises focused on the threat from mercenary or terror groups.

Air defense and artillery maneuvers were also carried out during the exercises, which lasted several days. 

African affairs and national security expert Gen. Mohammed Abdel-Wahed said the Hasm 2020 exercise “carries many internal and external messages of assurance to our brothers in Libya and deterrence to some regional parties.”

The drill “was a message of deterrence to anyone who thinks he can threaten Egyptian national security” and “a simulation of war,” he added.

According to an army statement, the drill’s main phase was attended by Egyptian Minister of Defense Mohamed Zaki, and included live artillery and weapons fire.

Strategic expert Gen. Samir Farag said: “What happened was not an ordinary drill because the forces attacked mercenaries. Our army always fights a regular army. What is different about this drill is training to combat mercenaries. One of the training tasks is to carry out attacks to eliminate mercenaries in cooperation with the air force.”

Farag said the drill “is a message that we will operate on the coasts if they are under threat.”

He said the Egyptian air force succeeded in providing air supplies, “meaning that we have forces capable of going anywhere.”

Farag said that the Western Region had been carefully selected as a location for the exercises.

“We closely monitor any drill carried out by any of our enemies,” he said, adding that Hasm 2020 had been studied and followed up by some countries in the region. 

Egyptian MP and journalist Mustafa Bakry said that “every Egyptian should be proud of their armed forces and their extensive preparation to counter any attack on Egypt or threaten its national security.”

Bakry said that Hasm 2020 sent “a clear message to anyone who attempts to threaten Egypt or its people.”

The Libyan cities of Sirte and Al-Jufra are a red line, he said, adding that “Egypt will never leave Libya and its brotherly people as an easy prey to the Turkish invader.”