December 11, 2019

After Citizen Protests, Israel Approves Austerity Budget

Even before the new government’s first budget was approved, 12,000 Israelis took to the streets Saturday night in a show of anger reminiscent of the vast social protests that rocked the nation in the summer of 2011. At that time, record crowds complained of the high cost of living — and eventually many voted their cause and expected the new leadership to respond.

Instead, the government announced that a large deficit required higher taxes and less spending.

The austerity measures are intended to help close a 2012 deficit of about $10.5 billion, which was 4.2 percent of the gross domestic product and double the amount that had been projected.

“Today, given the State of Israel’s national needs and the global economic crisis, it is important for the State of Israel to show that it is passing a budget,” Prime Minister Benjamin Netanyahu said on Monday at the start of the cabinet meeting. He announced that a compromise had been reached on the fiercely contested military budget, cutting it by $840 million.

But because voters had demanded a different budget blueprint, anger was focused less on Mr. Netanyahu, whose previous government created the deficit, than on Yair Lapid, the political rookie and former television host, who was recently elected and is now finance minister.

Mr. Lapid’s centrist Yesh Atid Party stunned the political establishment by placing second in the January election. Its success was widely attributed to the way that Mr. Lapid rode the wave of the social protest movement, campaigning on a slogan of “Where’s the money?” and championing the cause of Israel’s struggling middle classes.

But this budget includes, among other things, an increase of 1.5 percentage points in the personal income tax and of one point in the corporate tax. The value-added tax is set to rise to 18 percent from 17 percent, child allowances are to be sharply reduced, and subsidies for after-school programs for children under the age of 9 will be canceled. Mr. Lapid has noted that with the ultra-Orthodox political parties sitting in the opposition after being part of most government coalitions for the last three decades, financing for yeshivas has also been reduced.

The cuts hitting the public in the pocket appear to contradict the goals of the social protest movement, which began with a tent encampment in Tel Aviv to protest housing prices and peaked one night in September 2011 when half a million Israelis demonstrated against the high cost of living.

Mr. Lapid’s critics have argued that he has fallen into the groove of old politics, shying away from more sweeping structural changes.

Shelly Yacimovich, the leader of the Labor Party and head of the opposition, sent a letter to government ministers urging them to oppose the new budget. The economic program, she wrote, according to a copy posted on her party Web site, “was written by the previous government. Its clauses are very well known to many of us, for they were written in the near and distant past by the same Finance Ministry officials.”

Prof. Avia Spivak of the department of economics at Ben-Gurion University of the Negev, an early supporter of the social protest movement, said he agreed with those who said Mr. Lapid’s budget was “more of the same.”

The tax increases could have been done more progressively, Professor Spivak said in a telephone interview, for example, by increasing corporate taxes or by considering reintroducing an estate tax that was canceled in 1981 during a period of high inflation. The government could have raised the corporate tax by three percentage points, he said, “without seeing an exodus of companies abroad.”

Professor Spivak was a co-chairman of an academic committee that advised the grass-roots leaders of the social justice movement of 2011. He said he had no doubt that Mr. Lapid was voted in on the heels of the protest and that he was not fulfilling the protesters’ expectations.

“If he had had more time, he could have been more creative,” Professor Spivak said, adding that Mr. Lapid’s lack of experience made him reliant on Finance Ministry staff and outside experts who mostly presented him with familiar ideas.

Now that it has been approved by the government, the budget must be presented to Parliament in June and passed by July, and it is expected to be adopted, albeit with possible amendments, because the parties in the governing coalition hold a majority of seats. While overall spending would increase year to year, the deficit ceiling would be reduced to 3 percent of gross domestic product from 4.65 percent.

Although Israel’s economy is regarded as relatively strong and stable, having weathered the global economic downturn, the growth of recent years has directly benefited a small percentage of the population, living costs are high — perhaps because of a lack of competition, experts say — and the gap between the rich and the poor has been increasing.

Until a few days ago, Mr. Lapid had communicated with the public solely through Facebook since taking office. But feeling the popular heat, he broke his silence last week with a news conference and a television interview.

Mr. Lapid argued that for once, it was not only the middle class that was bearing the brunt, but also wealthier Israelis who would lose child allowances altogether and pay increased taxes on luxury goods.

In the interview that ran on Friday on Channel 2, Mr. Lapid said of those rallying against him: “Who are you demonstrating against? Are you demonstrating so that you can lose your jobs, so that the economy will collapse? You are demonstrating against yourselves.”

Yesh Atid won 19 seats in the 120-seat Parliament, positioning Mr. Lapid as a power broker. By taking on the Finance Ministry with no political experience or economic expertise, many analysts here said, he risked his popularity and exposed himself to criticism. Others said that the job could prove a valuable test of leadership, but that it was too early to tell how his political fortunes would fare.

Mr. Lapid said the pain would be short-lived. In a Facebook post on Sunday, he wrote that he was going through “stormy days,” but that the budget cuts were a necessary first step. He continued, “After that, the reforms will begin — all those things that will be done to bring down the cost of living and to improve the life of the working person.”

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Iraq Suspends Al Jazeera and Other TV Channels

The decision will not banish the channels from the airwaves: as satellite channels based abroad, they are beyond the reach of the Iraqi government. But it prohibits the channels’ journalists from reporting inside Iraq.

On Sunday afternoon, the normally bustling newsroom of one of the channels, Baghdad TV, was quiet. Riad Barazanji, the general manager of the station, which has ties to the Iraqi Islamic Party and some top Sunni leaders, said he told the channel’s reporters, “This is a good chance for you to go home and see your wives and children after so much time covering the uprisings.”

The edict issued by Iraq’s media commission, which has wide authority to regulate who is allowed to practice journalism and what information is reported, covered a range of channels, many of which have aggressively covered the Sunni protest movement in Iraq. Among the channels are Al Jazeera, the pan-Arab network based in Qatar, and Sharqiya, which has a wide viewership among Iraq’s Sunnis. It is based in Dubai and is owned by Saad al-Bazzaz, a wealthy Iraqi businessman.

Only one of the channels is aligned with the Shiite community: Anwar 2, which is based in Kuwait but owned by an Iranian family. It often gives voice to conspiracy theories about the involvement of neighboring Sunni nations in Iraq’s internal affairs.

In a statement released on its Web site, Al Jazeera, which has frequently been criticized by Middle Eastern governments upset over its aggressive coverage, said: “We are astonished by this development. We cover all sides of the stories in Iraq, and have done so for many years. The fact that so many channels have been hit all at once, though, suggests this is an indiscriminate decision.”

The letter that was delivered by the media commission to the channels stated that Iraqi security force commanders had also received a copy, and it ordered them to “do what’s necessary to stop all journalism operations” of the channels. Mr. Barazanji, of Baghdad TV, said he took that as an implicit threat that his reporters would be arrested if they continued to do their jobs. The commission also ordered local cellphone companies to shut off any phone numbers registered to Baghdad TV.

In its statement, the media commission said the networks had broadcast “misinformation, hype and exaggeration” that had deepened sectarian divisions in Iraq. The statement specifically mentioned coverage last week of a raid by security forces on a Sunni protest camp in Hawija, a northern village near Kirkuk, which left nearly 50 people dead and more than 100 wounded, and set off revenge attacks against the army and the police and a call to arms by Sunni tribal leaders. Clashes between Sunni gunmen and security forces continued over the weekend.

The commission said that it had the authority to restrict news coverage it deemed was encouraging “hatred on the basis of national or ethnic or religious identities that can incite discrimination, hostility or violence.”

In a written statement, a senior American official, who insisted on not being identified, said, “Besides giving the appearance of trying to cover up security force actions and intimidate the press, this undermines confidence in the Iraqi government’s ability to govern democratically and guarantee freedom of expression.”

Many of the channels had devoted large amounts of airtime to the Sunni protest movement that began in December and last week took a violent turn that has raised the specter of a new civil war. A report last year by Sharqiya, in particular, that alleged mistreatment of Sunni women prisoners in Iraqi jails, became a rallying cry for the protesters.

The Iraqi government has sought to cast the protest movement, which is divided by many factions, as a plot by Al Qaeda or the Baath Party to overturn Shiite rule in Iraq, and the media outlets aligned with various factions have sought to control the narrative. Last week when channels like Sharqiya were showing images of the mayhem in Hawija, the state-run channel Iraqiya was broadcasting a poetry festival in Basra. On Friday, as some of the channels whose licenses have now been revoked broadcast fiery speeches from Sunni leaders in Anbar Province exhorting young men to take up arms against the government, Iraqiya was showing programs about movies and flowers. On some Fridays, it has run a documentary about crimes committed by Saddam Hussein’s government.

For now, Mr. Barazanji said, his station will continue to broadcast raw images of the protests provided by a satellite truck owned by local tribes in Sunni regions.

Yasir Ghazi contributed reporting.

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Israeli Cabinet Backs Outline for Social Change

The cabinet voted 21 to 8 to approve the outline of a report by a committee for socioeconomic change set up by the government and led by Manuel Trajtenberg, a respected professor of economics.

The report was welcomed by Prime Minister Benjamin Netanyahu when it was presented late last month. But when he tried to bring it to a vote last week, some of his coalition partners decided to flex their political muscle and raised objections, making it clear that Mr. Netanyahu had not lined up a majority beforehand.

One of the parties that objected last week, Yisrael Beiteinu, switched to support the committee’s plan this week after receiving promises that some of its own socioeconomic demands would be met; the change gave Mr. Netanyahu a comfortable majority in the vote on Sunday.

Another coalition partner, the ultra-Orthodox Shas party, which draws much of its support from low-income families, voted against the plan. So did the defense minister, Ehud Barak, and the minister of home-front defense, Matan Vilnai, who oppose the cuts to the defense budget that the committee has recommended to finance the plan.

The social movement began in mid-July when a group of young Israelis pitched tents in the center of Tel Aviv to protest inflated housing prices. The committee recommended building almost 200,000 apartments over the next five years, making more apartments available as rentals and increasing housing subsidies for the needy.

The panel also recommended raising taxes on the wealthy and on corporations, building more day care centers and providing free pre-kindergarten for children 3 to 5 years old.

Even so, leaders of the social protest movement criticized the report, saying it merely moved money around within the existing budget and did not call for more fundamental changes.

The committee’s outline must now be examined in more detail by the government and then be put to a vote in Parliament, a process that is expected to take several months.

Separately, the representatives of the international quartet of Middle East peacemakers met in Brussels on Sunday to follow up on their call for Israel and the Palestinians to resume peace talks in an effort to deflect the impact of a contentious Palestinian bid for recognition of statehood and membership in the United Nations.

The talks have been stalled for more than a year, with the Palestinians demanding a halt to all settlement construction before resuming negotiations and the Israelis insisting on talks with no preconditions. The quartet — the United States, the United Nations, the European Union and Russia — has called for talks without preconditions and has asked the sides “to refrain from provocative actions.”

Though there was no immediate sign of an end to the impasse, the European Union’s foreign policy chief, Catherine Ashton, said in a statement after Sunday’s meeting that the quartet would be “contacting the parties to invite them to meet in the coming days.”

Former Prime Minister Tony Blair of Britain, the quartet’s envoy, said: “We look forward to meeting with the parties shortly. This provides us with the opportunity to explore grounds for revived negotiations to take place.”

Ethan Bronner contributed reporting.

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Mubarak Faces More Questioning on Gas Deal With Israel

The announcement, carried by the government-run Middle East News Agency, came after the agency reported that the former oil minister, Samih Fahmy, and five other top officials had been imprisoned pending an investigation of the deal.

Adel el-Saeed, the prosecutor’s spokesman, issued a statement saying that among other issues, Mr. Mubarak was being questioned about gas exports to Israel at a low price that amounted to “hurting the country’s interests.” Egypt lost more than $714 million in the deal, the prosecutor said in a statement quoted by wire services a day earlier.

Selling gas to Israel was deeply unpopular in Egypt from the time the pipeline opened in 2008, given the sour public mood toward its neighbor, and it was a rallying point for the Tahrir Square protest movement since its start in January. But the deal was protected at the highest levels as long as Mr. Mubarak was in power. The key shareholder in the private company that brokered the deal was the president’s longtime friend, Hussein K. Salem, and a senior Egyptian official said the intelligence service also owned a slice of the deal.

Now that the protection has been removed, however, the deal has emerged as a kind of public litmus test toward how relations with Israel will be handled in the post-Mubarak era.

“Hosni Mubarak would always be completely responsive to what Israel wanted with zero regard for what the man in the street wanted,” said Mansour Abdel Wahab Mansour, a Hebrew language professor and political analyst of Arab-Israeli relations at Ain Shams University. “That is not going to change 180 degrees, but the new government or the new system will have to give somewhat more consideration to public opinion.”

Egyptian gas exports, not yet fully restored since an explosion rocked the pipeline in the Sinai in February, used to supply 40 percent of Israeli needs.

There were questions from the moment the deal was signed, particularly since it was handed to Mr. Salem and an Israeli partner, Yosef Meiman, whose East Mediterranean Gas Company acted as a middleman between Egypt and the Israel Electric Corporation and other clients.

The basic accusation was that the partners obtained the gas at a preferential rate from the government of Egypt, which cut supplies to local consumers in order to fill the Israeli deal, and then sold the gas at a significant markup, pocketing the profits.

The details of the full deal have never been released publicly. But former Egyptian government officials who have seen it, and who spoke on the condition of anonymity, said the price renegotiated around 2008 was raised to about $4 per million BTUs, up from the previous cap of $1.25 per million BTUs. East Mediterranean Gas could then negotiate its own terms with Israeli buyers.

There is no global benchmark global price for natural gas, noted Nikos Tsafos, an analyst at PFC Energy in Washington. But Mr. Tsafos said that in comparable deals in the region, Turkey, Greece and Italy were paying $7 to $10 per million BTUs.

Mr. Meiman, who controls about one-quarter of East Mediterranean Gas, could not be reached for comment. But the general attitude of the Israeli government toward the arrangement has been that it can accept a re-examination of the deal as long as it is only about price. A senior Israeli official said, however, that if the investigation becomes a pretext for halting the deal for domestic political reasons, Israel would have reason for genuine concern.

In 2007, Mr. Salem sold off separate stakes in the company to a Thai firm and to a partnership headed by Sam Zell, the American real estate tycoon. Mr. Zell’s spokeswoman, Terry Holt, did not respond to requests for a comment on Friday.

Permission for the sale came from the presidency and the intelligence agency, which had a small stake in the deal along with the government-owned Egyptian Natural Gas Holding Company, said the senior Egyptian official, speaking on the condition of anonymity. Ministers outside the petroleum ministry were not consulted and the government ignored a court order to show publicly that the deal was not diverting gas needed domestically.

“That was a big question mark,” the official said. “We never understood why it was sold — and it would have made sense to allow local companies to buy it. From a national security point of view it did not end up with the most sensible arrangement.”

For the Egyptian business community, the answer came down to Mr. Salem, an intelligence agent turned tycoon who fled Egypt after the uprising and is being sought by prosecutors.

Ethan Bronner contributed reporting from Jerusalem.

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