Knesset in session > Itzik Edri, CC BY 2.5, via Wikimedia Commons.

After 35 hours of voting, the Knesset last week passed a two-year budget – Israel’s first since 2018. The adoption of the budget – in which 800 opposition objections had to be voted upon – provides the anti-Netanyahu coalition government with a major victory, removing the threat of new elections and scuppering the former prime minister’s hopes of an early return to office.

What happened

  • On Thursday, the Knesset passed the £103bn 2021 budget by a wafer-thin 61-59 vote majority, with the £108bn 2022 budget approved on Friday by 59-56 votes.
  • Failure to pass a budget for 2021 by the legally mandated deadline of 14 November would have led to the automatic dissolution of the Knesset and the scheduling of new elections. Political deadlock forced Israeli voters to go to the polls on four occasions between April 2019 and March 2021.
  • The ideologically eclectic coalition which forced Netanyahu from office in June celebrated the passage of the budget. “This is a day of celebration for the State of Israel. After years of chaos. We formed a government, overcame the Delta variant, and now, thank God, we have passed a budget for Israel,” said prime minister Naftali Bennett. “We’ll keep going, full steam ahead.”
  • Foreign minister Yair Lapid – leader of the centre-left Yesh Atid party and a key figure in both ousting Netanyahu and securing the Knesset’s approval for the budget – said: “We took responsibility and kept our promise.” Under the coalition’s “rotation” agreement, Lapid is due to become prime minster in August 2023 to serve out the rest of the government’s four-year term in office.
  • United Arab List leader Mansour Abbas, who led an Israeli-Arab party into government for the first time this summer, noted the historic nature of the budget: “This good news gives citizens hope. This is the first time that an Arab party plays a central role in passing a budget and establishing a coalition. This is an important step in the process of political integration, the realisation of the right for civic partnership and the taking of collective responsibility for the benet of all citizens, Arabs and Jews.”
  • Speaking in advance of the budget debate, opposition leader Netanyahu vowed: “We will continue to fight this awful government. We will leave no stone unturned, we will look for any way to topple it, to return Israel to the right track.” But with the approval of the budget, the former prime minister – who claimed “we’ll be back soon” when he left office in the summer – has lost the opportunity to bring the coalition to a premature end and force early elections.
  • “A normal country operates with a budget. We’re going back to being a normal country,” one senior government official told Foreign Policy magazine. “It’s also evidence that the government is functioning pretty well, definitely better than some sceptics said it would. We’ve overcome a major hurdle that undermined many coalitions in the past.”

Confusion reigns

So confusing was the mammoth budget debate that some MKs struggled to keep up with how they were supposed to be voting. Even Netanyahu accidentally voted with the government in six divisions, while one Labor MK’s inadvertent vote with the opposition led to a two-hour delay while a clause was reapproved in committee. Netanyahu shrugged off his votes with the government, jibing: “It happens that you get confused while voting. Ask anyone who voted for Bennett.” A previous ally of Netanyahu, Bennett abandoned the right-wing bloc to help bring the coalition to power.

What’s in it?

The budget contains a raft of measures – many of which reflect the centre-left agenda of Labor, Yesh Atid and Meretz:

  • Nearly £2bn will be invested in developing transportation, drainage, and sewage infrastructure.
  • Action to cut the gender salary gap, while steadily raising the retirement age for women to 65.
  • Construction of a Tel Aviv metropolitan light rail system and the imposition of a congestion charge in the city in 2024.
  • An urban renewal plan to increase the supply of homes by 280,000 over the next four years and push plans for a further 500,000 homes.
  • Cutting regulation on small and medium-sized businesses to allow easier access to government and foreign investment.
  • Reform to the bank system to reduce interest rates and commissions by making it easier to move banks and allow non-banks to offer services at competitive rates.
  • Action to reduce the cost of living by making EU and US imports easier thus driving down prices.

“A budget that will be good for Israel”

In its editorial, the centre-left Haaretz newspaper praised the budget as “good for Israel”. “The 2022 budget is an outstanding one. It is accompanied by an unprecedented ‘Arrangements Law,’ which contains 27 reforms. If executed as proposed, these reforms will change the direction of the economy and drive it forward,” the paper suggested. “Obviously, legislating reforms is not enough. Also needed is political stability that will buy time to allow the implementation of these reforms. The last thing the economy needs now is another election.”

Man of the moment

Lapid is reported to have played a key role in keeping the coalition united in recent weeks as the vital budget vote loomed. He drove with Abbas to unrecognised villages in the Negev, met with Abir Kara – a member of Bennett’s right-wing Yamina party – to discuss unemployment allowances for the self-employed, and worked with Labor’s Ram Shefa on agricultural reforms.

Wither Bibi

Ironically, Netanyahu engineered the fall of the unhappy coalition with the centrist Blue and White party he led for a few months last year by sabotaging the passage of a budget last December, thus setting in train new elections.

  • The approval of a state budget makes it more difficult to topple the coalition. A successful no-confidence motion requires not just a majority vote in the Knesset to pass but also a viable alternative government and prime minister to be agreed upon in advance – a goal that, without defectors from the coalition or the highly unlikely backing of the Israeli-Arab Joint List, is almost certainly out of Netanyahu’s reach, Likud sources have indicated.
  • Some observers suggested that the coalition’s survival will not ultimately affect Netanyahu’s aim of returning to power: “It changes the timeframe for him,” said Haaretz columnist Anshel Pfeffer. “It doesn’t mean he’s going to give up. He’s not going to give up. He’s incapable of giving up.”
  • But some of Netanyahu’s one-time allies turned adversaries believe his future as a force on the Israeli political scene is now much less certain. Finance minister Avigdor Liberman, an ex-Netanyahu chief of staff who is now a bitter political foe, claimed the former prime minister had lost his “magic”. “I saw Netanyahu, I have known him for a while now. There sat a man who had turned off, without passion, without energy,” Liberman said of the opposition leader’s performance during the budget debate. Housing minister Ze’ev Elkin, another former Netanyahu confidant, was reported to have said after the budget’s passage: “the Netanyahu era [is] over”.
  • Netanyahu also faces a primary challenge from former Knesset speaker Yuli Edelstein. “With Benjamin Netanyahu, we failed four times to muster a government. How are we suddenly going to succeed on the fifth time?” the ex-Netanyahu ally asked when launching his challenge last month.
  • While Netanyahu remains on trial facing corruption charges, justice minister Gideon Sa’ar, another ex-Likudnik who bolted the party and joined efforts to bring down the former prime minister, is pushing legislation that would stop an indicted MK from being allowed to form a government.

Poll position 

Polls currently show Likud would emerge once again as the largest party – but, with its current constellation of allies, still fall short of a Knesset majority. The most recent surveys also indicate that Labor would rise to 10 seats, becoming the third-largest party in parliament. Just over half (51 percent) of those polled said they want the coalition government to continue, 40 percent said they want new elections, and nine percent said they don’t know.

Trouble ahead?

Despite approval of the budget averting early elections, the coalition – which stretches from the left to right of the Israeli political spectrum and includes an Islamist Israeli-Arab party – still faces contentious issues which will test its endurance. Thus far the government has focused on issues where it has been able to reach a consensus while avoiding those – such as relations with the Palestinians – where Labor and Meretz take a sharply different stance from Yamina and Sa’ar’s New Hope party. Potential stumbling blocks in the months ahead include US plans to open a Palestinian consulate in Jerusalem and a range of potential construction projects in East Jerusalem, including the controversial E1 development. On Monday, Labor leader Merav Michaeli – who serves as transport minister in the coalition – made clear that her party would, alongside Meretz, oppose Elkin’s effort to build new settlement homes in the West Bank’s Jordan Valley.

What happens next

But its own ideological fissures may be less of a threat to the coalition than the possibility that – faced with a long spell out of power – Netanyahu may abandon Israeli domestic politics. “The strongest glue binding the coalition is the existence of Netanyahu,” said political analyst Avraham Diskin. “If Netanyahu quits, then that presents a serious chance for the coalition to fall.”