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Leza L Olson  08/25/2006 02:07:33 PM  From  DB/Inbox:  Leza L Olson

Cable 
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UNCLAS        TEL AVIV 03395

SIPDIS
CXTelA:
    ACTION: POL
    INFO:   IPSC PD IMO RES ECON DAO AID ADM DCM AMB RSO
            CONS

DISSEMINATION: POL
CHARGE: PROG

APPROVED: DCM:GCRETZ
DRAFTED: POL:RBLAUKOPF
CLEARED: POL/C:NOLSEN

VZCZCTVI107
RR RUEHC RUEHXK
DE RUEHTV #3395/01 2370727
ZNR UUUUU ZZH
R 250727Z AUG 06
FM AMEMBASSY TEL AVIV
TO RUEHC/SECSTATE WASHDC 5897
INFO RUEHXK/ARAB ISRAELI COLLECTIVE

UNCLAS SECTION 01 OF 02 TEL AVIV 003395 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV PINR IS
 
SUBJECT: NO BUDGET: NO COALITION -- AND VICE VERSA 
 
 
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SUMMARY 
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¶1.  This year, the budget wrangling got under way early in the form 
of a government attempt to slash 2 billion NIS from its own 2006 
expenditure in order to free up funds for rehabilitation of the 
Katyusha-battered north of Israel.  Initial attempts to secure 
Knesset Finance Committee approval for the cuts have been stymied by 
Kadima's primary coalition partner -- Labor.  Does this spell defeat 
for the governing party of PM Olmert over the 2007 budget?   Not 
yet, but time, as well as funding, is in short supply. 
 
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THE GOVERNMENT TESTS THE WATERS 
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¶2. When the government brought its proposal for a 2 billion shekel 
reduction in ministerial spending to the Finance Committee last week 
it did not anticipate the intensity of opposition it encountered 
from its Labor party coalition partner.  The purpose of the cuts -- 
funding the physical reconstruction and economic rehabilitation of 
the north of Israel after a month-long Katyusha bombardment which 
paralysed business and industry -- is hardly controversial. But PM 
Olmert's Kadima party did not reckon with the "rebels" in the Labor 
party who dug their heels in at the first Finance Committee session 
scheduled to vote on the cuts and did so once again this week.  The 
Labor "rebels" led by MKs Avishai Braverman and Orit Noked, both of 
whom are "standard bearers" for Labor's social agenda insist they 
object on principle and that Labor would be betraying its electoral 
commitments were it to support the cuts.  The government now plans 
to bring the matter to the Knesset committee August 28 in a third 
attempt to secure approval. 
 
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LABOR DOING WHAT LABOR DOES 
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¶3.  Since 1977, when the Labor party lost its historic monopoly on 
government, it has found itself compromising its socio-economic 
platform in uneasy coalitions with the Likud and latterly with 
Kadima. Those Labor MKs who secure ministerial positions are eager 
to retain them while the disappointed legislators -- currently 12 in 
number -- operate as unofficial party whips, who seek to pull their 
ministerial colleagues back from the brink of betrayal of election 
promises. This perpetual coalition dissent could prove politically 
lethal, specifically in the context of the draft budget legislation 
for 2007 which will loom large in October, when the Knesset emerges 
from its summer recess. 
 
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KADIMA -- WITH A COALITION TO LOSE 
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¶4.  Coalition whip Avigdor Yitzchaki lost his patience this week -- 
or gave a good imitation of doing so. Following swiftly on the 
failed second attempt of his Kadima party to secure Finance 
Committee approval of the budget cuts, Yitzchaki threatened Labor 
with political divorce. In a deliberate leak to the media, Yitzchaki 
said if Labor refuses to comply with coalition discipline, he will 
advise PM Olmert to bid farewell to its primary coalition partner, 
in favor of an alliance with the right-wing Yisrael Beiteinu.  Some 
media commentators took Yisrael Beiteinu chairman Avigdor 
Lieberman's remark, that his party would only join the coalition 
once Labor is removed, to mean that he was eager to enter the 
coalition.  But Lieberman was making PM Olmert an offer he cannot 
afford to accept: 11 Yisrael Beiteinu MKs in place of 19 Labor 
members. It later emerged that media spin was responsible for 
promoting the dubious logic of such a coalition trade-off: A cursory 
check by an Israel Radio reporter revealed that no substantive 
contacts had taken place so far between Kadima and Yisrael 
Beiteinu. 
 
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CAN KADIMA CONTROL THE COALITION? 
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¶5. Kadima's budget dilemma will be compounded, this year, by its 
precarious situation in the aftermath of Israel's failed Lebanon 
campaign. In addition to the traditional horse-trading which 
accompanies budget negotiations with all political parties, be they 
coalition or opposition members, Kadima may face a rearguard action 
by coalition parties using the budget as a pretext to abandon the 
partnership with Kadima if they perceive the coalition as facing 
political demise. From the perspective of Kadima's coalition 
partners, the budget is the ideal platform on which to base such a 
maneuver: The budget is a distinct issue of weight and seriousness; 
and dissent on a matter of principle, ostensibly unrelated to the 
delicate issue of who is to blame for the Lebanon debacle, would be 
a convenient pretext for abandoning a doomed political partnership. 
 
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LABOR WEIGHS ITS OPTIONS 
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¶6.  Labor is holding a midweek closed-door faction meeting. On the 
agenda is a discussion of the opposition of its representatives in 
the Knesset Finance Committee to the budget cuts.  Labor chairman 
Amir Peretz and party whip Efraim Sneh are expected to demand the 
imposition of coalition discipline when the cuts are submitted for a 
third time to a Knesset Finance committee vote.  Whatever is decided 
in the closed-door planning session, it is certain that the question 
of Labor's future in the coalition will be discussed. In law, the 
coalition has until the end of March 2007 to pass the draft budget 
by a simple majority vote. But Kadima and its coalition partners 
know that events unrelated to the budget could overtake them and 
force fateful decisions for their political survival in the near 
future. 
 
JONES