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.

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