Israel's next government inherits a 25 billion shekel defense budget gap and military plans worth hundreds of billions

The defense budget will be the main economic decision facing Israel's next government, the Hebrew-language business daily Globes reported under the headline "400 billion shekels is only the beginning." Globes wrote that an immediate gap of 25 billion shekels has put the Finance Ministry and the defense establishment in direct conflict. The larger problem, it said, will be funding the Israel Defense Forces' buildup plans, which run to hundreds of billions of shekels, without a multi-year plan for the military. The newspaper cited warnings from the governor of the Bank of Israel that a jump in spending without adjustments would prevent a fall in the ratio of debt to gross domestic product (GDP) and would hurt citizens.

Israeli financial reporting puts numbers on that warning. In a July scenario, the Bank of Israel estimated that up to 25 billion shekels in additional defense spending would raise the defense budget to about 183 billion shekels and lift the deficit to about 5.5% of GDP, compared with 4.9% in its base case, Calcalist reported. The central bank estimated the extra spending could add about 0.3 percentage points to inflation.

The budget fight will take place during disputed coalition talks. Israeli police said they found no evidence to support Likud's claim that Arab parties rigged the parliamentary election, RT reported. Palestinian citizens of Israel expressed optimism after Arab parties performed strongly, Africanews reported. That result makes the parliamentary arithmetic for any coalition more difficult. Globes also noted, in a separate consumer report, that the shekel has weakened.