The new Israeli government will probably be presented to the Knesset shortly, and it will of course win a vote of confidence. Thus a government will be formed officially headed by Benjamin Netanyahu. To understand what the government will be like, and who will really hold the reins, we should recall one basic fact: this is not a government based on 67 members of Knesset, but on a coalition of 57 members of Knesset with another ten alongside.
Netanyahu's "natural" coalition numbers only 57 MKs, and in order to rule it needs the support of the Kulanu party, which does not see itself as a natural part of the agenda that Netanyahu seeks to promote. On the contrary, some of the Kulanu MKs would feel much more comfortable in a coalition headed by Zionist Union leader Isaac Herzog, and the suspicion is that Kulanu leader Moshe Kahlon himself would not be sorry if that were the situation.
If the media reports are to be believed, Netanyahu gained a first taste of what is in store for him and his agenda when he heard adamant opposition from Kahlon to the proposals for turning Israel's Supreme Court into a virtual extension of the Likud Central Committee. Even if this was a principled stand on Kahlon's part, in effect, it served to indicate to Netanyahu what the rules of the game are in the coalition he is forming.
It will take Netanyahu little time to understand; for his Likud colleagues it will be somewhat harder, but in the end they too will get it. Under those rules, to which Netanyahu is forced to agree, all powers in setting economic policy, apart from the chairmanship of the Knesset Finance Committee, are in Kahlon's hands. Every coalition partner, and every player in the economy, will know from now on that the address for promoting any cause or for getting things moving is the minister of finance's bureau.
This is different from what has happened in the past few years. With Yuval Steinitz as finance minister, everyone knew that the real finance minister's bureau was in the prime minister's bureau; and with the last minister, Yair Lapid, everyone knew that that the role of minister of finance was really vacant. This situation no longer holds. If a haredi party wants to promote some deal, if Habayit Hayehudi wants money for settlements, if the army wants a budget supplement, there is only one address: Moshe Kahlon.
Kahlon knows that his big test will be the 2016 budget. The Ministry of Finance Budgets Division will have to get used to the fact that the new minister will want to be involved in every detail, including the reforms that he promised. And all the coalition partners will have to understand that their requests and wishes will be answered only to the extent that they are consistent with those of the finance minister. Netanyahu will probably no longer be able to save them, even should he want to. And if anyone forgets it, there will be someone to remind them that the power of ten MKs is very great, particularly when there's no government without them.
So, if Kahlon decides that he wants to raise spending on social services, and that in order to do so he needs a real cut in the defense budget, that's what will happen, and this time around Netanyahu will not be able to impose his view. This strengthens the chances that Kahlon will introduce into the budget just about everything he wants to accomplish, from a deep reform of the way public land is sold, through shortening planning processes, giving greater powers to the Antitrust Commissioner, to greater competition in the capital market. The only area in which Kahlon will probably not be able to advance his agenda is reform of the banking system, because the Bank of Israel, which controls the structure of banking, is not part of the political game.
This state of affairs does not seem to bode well for the stability of the new government. By reputation, Netanyahu has a suspicious streak, and Kahlon's great strength will aggravate it. In Netanyahu's party, the Likud, the new reality will engender ferment, particularly among government ministers, who will be entitled to see themselves as threatened by a politician who makes no secret of his intentions for the future. Every Likud minister can now see his prospects as dependent on Kahlon failing as minister of finance. A similar dynamic was at work in Yair Lapid's days as finance minister, but Kahlon is a far more experienced politician than his predecessor, and far more aware of the political power he wields.
In the end, all the tensions within the coalition of 57 plus 10 center on the 2016 state budget. The question is, when will those on the weaker side of the equation, the members of the natural right-wing coalition, realize that despite all their fond wishes on the eve of the election, this time around they have got themselves a more aggressive, more experienced, and more focused version of Lapid, and this at a time when their political strength and room for maneuver are much more limited?
Published by Globes [online], Israel business news - www.globes-online.com - on April 27, 2015
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