NETANYAHU MAY CAVE TO SHAS BUDGET DEMANDS; SHINUI

C O N F I D E N T I A L TEL AVIV 001362 SIPDIS E.O. 12958: DECL: 03/08/2015 TAGS: PGOV PREL ECON IS GOI INTERNAL ECONOMY AND FINANCE SUBJECT: NETANYAHU MAY CAVE TO SHAS BUDGET DEMANDS; SHINUI DESPERATELY SEEKS WAY BACK TO COALITION REF: TEL AVIV 1277 Classified By: Ambassador Daniel C. Kurtzer for reasons 1.4 (b,d). ¶1. (C) As they scramble for votes ahead of the March 17 budget vote, Prime Minister Sharon and Finance Minister Netanyahu appear ready -- albeit tentatively -- to make budget concessions to Shas, rather than take Shinui back into the coalition. Sharon needs a simple Knesset majority for budget passage, but the 53-54 votes he now holds appear short of a win. Sharon can secure 11 budget votes from Shas, which opposes disengagement, by allocating money to Shas interests, while leaving Shas outside the coalition. Getting budget votes from Shinui, which supports disengagement, requires stiffing Shas, taking Shinui back into the coalition, and risking loss of the coalition's religious parties. ¶2. (C) Reacting to the continued threat by 13 Likud MKs ("Likud rebels") to oppose the budget unless Sharon holds a disengagement referendum, Netanyahu stated publicly March 7 that, without budget support from the Likud rebels, he will have no choice but to capitulate to Shas's budget demands. The Finance Ministry's director of budgets reportedly said that these budget concessions would cost the GOI some half a billion shekels (USD 120 million) and would likely come from the defense and education budgets. ¶3. (C) At the same time, the number two leader of Shinui, former Interior Minister Avraham Poraz, announced to the press that his secular party is willing to join a coalition that includes the ultra-Orthodox Agudat Yisrael and Degel HaTorah parties (formerly a single party known as United Torah Judaism). Poraz even went so far as to say that Shinui would not automatically oppose funding transfers requested by the ultra-Orthodox parties if those requests were "legitimate." (Note: Shinui resigned from the coalition December 1 when Sharon agreed to transfer NIS 290 million for UTJ programs. End note.) Shinui leader Tommy Lapid nonetheless reaffirmed his earlier statement that his party would vote against the budget if not invited back into the coalition. ¶4. (C) Agudat Yisrael MK Ya'acov Litzman and Degel HaTorah MK Rabbi Moshe Gafni told poloff emphatically March 8 that, Poraz's statement notwithstanding, their respective parties would not sit in a coalition with Shinui. Litzman said that Sharon is more likely to strike a deal with Shas than Shinui. Both Gafni and Litzman could not predict which party would ultimately rescue Sharon's budget, but both were certain --without offering specifics -- that the budget would pass. Litzman based his prognosis mainly on his certainty that "no (MK) in the (Knesset),except perhaps several of the Likud rebels, wants elections now." ¶5. (C) Comment: Sharon continues to cast a wide net to ensure his 2005 budget passes before the March 31 deadline (reftel). Sharon's aides are reportedly continuing negotiations with Arab parties as well as individual Likud rebels. Sharon would prefer to rely on Shinui or Shas, rather than on the left-wing Yahad party or the Arab parties, which the right wing perceives as illegitimate sources of support. Sharon has indicated in the past that he prefers to have a coalition that includes at least one religious party to lend greater legitimacy to his government both within Likud and in the public eye. ********************************************* ******************** Visit Embassy Tel Aviv's Classified Website: http://www.state.sgov.gov/p/nea/telaviv You can also access this site through the State Department's Classified SIPRNET website. ********************************************* ******************** KURTZER