Jul.19, 2012 | 2:57 AM–Many of those in the know at the Finance Ministry have suspected for some time that Prime Minister Benjamin Netanyahu knew that Kadima would be leaving the coalition and that early elections were on the way.

Because of that, they say, Netanyahu postponed the start of deliberations between his office and the treasury over the 2013 budget, which should have begun in the last few weeks. No prime minister can afford to go into elections saddled with a budget of spending cuts and tax hikes, as the 2013 spending package will inevitably have.

Kadima is gone and punters are saying elections will probably be next February. That means the Knesset will not vote on a 2013 budget until sometime after election day. Until then, government spending will just be a continuation of the 2012 budget, as the law requires, with the treasury allocating 1/12th of this year’s budget each month. That could last through the first half of next year, or even longer.

This leaves Netanyahu in a rather uncomfortable situation. Between a slowing economy, controversy over drafting the ultra-Orthodox and the social justice protests, his situation looks worse than it did two months ago, when he canceled early elections and signed a coalition deal with Kadima.

The prime minister faces the lose-lose situation of either already raising taxes in 2012 or seeing the budget deficit swell to 4% of gross domestic product, which would threaten Israel’s credit rating and raise interest rates. Next year would look even worse, with the deficit reaching 5% or even 6%.

Under the circumstances he should prefer calling elections before the end of the year to avoid doing damage to the economy by delaying passage of a 2013 budget. But with his poll standings weaker than they were two months ago, Netanyahu is unlikely to take such a risky move…Read More>>

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