Three hours after a white night in the Knesset that ended with the approval of the largest budget in Israel's history, Finance Minister Bezalel Smotrich, the laureate who managed to sleep only two hours a night, takes time for an interview for Israel Hayom with his countenance revealing the great sense of satisfaction and sigh of relief on its side, but also the desire not to be dragged into a discussion about the stormy political struggles that have taken place within the coalition in recent weeks. Despite his fatigue, when he is asked about finances, his eyes light up and he speaks passionately.
Congratulations on the budget, are you satisfied? There is quite a bit of criticism of coalition finances, including from the professional echelon of your ministry.
"It was not an easy event, but the budget is really a good budget, also in terms of the fact that it is conservative and restrained, which is critical in an inflationary environment, which is our most important challenge at the moment in the government. From the first moment I said that we would maintain the fiscal frameworks and not breach them. We need fiscal policy to be in line with monetary policy, otherwise the Governor will have to raise the interest rate more and more.
Can you guarantee that you will meet the deficit target of 0.9% that you set in the budget?
"No, and I don't have to. Our normal deficit target is 2.5%. We are in a period of global uncertainty, and this may actually be a very big opportunity for the Israeli market.
"We have a security reserve, we have a safety cushion. Even if I have a decline in state revenues of NIS 30-40 billion in 2024, we still won't cross the 2-2.5% deficit line. There will be no tax increase, maybe even the opposite."
Ministry of Finance. Not everyone agreed with the minister, photo: Oren Ben Hakon
The passage of the budget gives the minister great confidence that allows him to make decisive statements on the issue of taxes, accompanied by arrows that he sends directly to the media. On the deficit at the end of the year, he says, "We went for a budget with a deficit target of 0.8-0.9%, the economist now estimates that we are now at 1.1%. Even if we end up with a 2% deficit, nothing happened. All the lies in the media, the panic, the cuts, articles that the Ministry of Finance is already talking about raising taxes. I say, there will be no tax increase, there will be no cuts, because we don't need it."
Let's talk about the Arnona fund.
"More than twenty years they've been trying to get this through. When I took office, the budget department told me listen, they try to pass this every year, so put it as a 'goat' that you will have something to negotiate about. I went in, I put hours into it, I studied, I said, guys there is no such thing, it passes. It's the right thing, and it needs to be passed."
GPO
You reduce the future income of strong municipalities that know how to take advantage of the infrastructure at their disposal, such as Tel Aviv.
"But who built this infrastructure for it? Country. After all, Tel Aviv is Tel Aviv not because of Ron Huldai. If you put Ron Huldai in Dimona, Dimona won't become Tel Aviv, because it doesn't sit on the sea and it doesn't sit in the center of the country, and mainly because the state hasn't invested hundreds of billions in it over the years in infrastructure."
Ron Huldai. "It is not because of him that Tel Aviv is Tel Aviv", Photo: Coco
Back to the budget: The Arrangements Law does not sufficiently address the cost of living.
"We are significantly increasing the disposable income of Israeli citizens by increasing negative income tax, a work grant for those earning low wages, and through credit points for children up to age 18. The broiler reform that we did, with the extension of the validity of frozen meat from 80 days to 120 days, as in the rest of the world, will increase imports. We are providing more direct support and will not harm the farmers. And why is there no import? Because crop protection has served for many years as an import barrier, not really for pest prevention reasons. We are investing NIS 4 billion over the next <> years in encouraging innovation in order to enable the introduction of more technology and more things that will enable us to increase our smooth output."
Bezalel Smotrich, Photo: Oren Ben Hakon
What about the law restricting monopolies?
"This law wasn't precise enough, we received requests from small manufacturers, who have to rely on large distribution networks because they can't get into supermarkets. We are setting up a public committee next week, as they did for the banks, and within 3 months we will receive recommendations. The main thing I proved in this budget is that I am not committed to anyone, and I have the courage, and also the ability in the end to fight for it. We will now enter the issues of monopoly and centralization as strongly as possible.
"I, as a right-winger who wants a free market, don't like to interfere in the market, but our job as a government is to allow conditions of real competition, and for that we need to dismantle monopolies built over decades. There are monopolies here under the auspices of the law, built over years, with regulatory worlds that ultimately served those players who were strong. It's enormous powers, the Central Beverage Company has become the owner of News 12 and all these entities invest hundreds of millions of dollars in newspaper advertising. I have no doubt that I will have an uphill battle here. We will start with food, move on to medicines and other sectors that are centralized and break them down and open the market to competition."
Do you believe prices will start to fall during your term?
"The answer is yes. Unequivocally. We will promote the dismantling of centralization and the removal of regulatory barriers. Take Carrefour, for example, it markets 5,000 products in Europe. She managed to bring barely 1,000 here because they do 'Via de la Rosa' on everything."
You approved an increase in the allowances of the elderly and an increase in the budget of Haredi educational institutions that do not teach core curriculum, contrary to the position of the professional echelon in the Ministry of Finance and of most economists.
"True, there are also about three billion that go to the yeshiva budget and Haredi education. As a key phrase, I will say that we maintain a preference for state education, and maintain a preference and incentive for core studies. There are exempt institutions that study 55% core and receive 55% of the budget. It was determined more than twenty years ago. What has happened over the years is that because of additions such as New Horizon, after-school programs, etc., 100% has become 200%. But the 55% remains nominally the same. So from 55% it eroded to 24%. All we're doing now is bringing it back to 55%, from the state's 100% up-to-date, and we've told them we're bringing in a new horizon. I think that should be commended. Today we are creating an incentive according to which an institution that does not enter a new horizon will not receive the addition. And I was very surprised, we went for it to the rabbis and I was sure that the rabbis would not agree.
"I don't hide my position, I appreciate Torah study, I think it's an important value in general in a Jewish state. Those who are good at it will continue to study, and those who are not, will enter the labor market at a much earlier age. I know one thing that it didn't work under duress, and it won't work under duress. And anyone who thinks that what hasn't worked for 75 years can until tomorrow morning shout and be right, but wise he isn't, and he won't understand the consequences."
"I didn't agree to break frames"
In other words, in your opinion, increasing the budget of Haredi institutions will not constitute a negative incentive to integrate the Haredi sector into the labor market, as the professional echelon in your ministry claims?
"First of all, it must be understood that all this opinion does not mean that all these three billion shekels will cost us trillions in 2060, but that the continuation of the existing trend will lead to this, and the claim is that this budget continues in the same direction. I think this assessment is wrong. I do not deny the fact that one of the biggest challenges facing the Israeli economy and mine as Minister of Finance is really integrating populations into the labor market. You have to know, the ultra-Orthodox public is undergoing tremendous changes. It's social, cultural changes and it's not something we do in Zbang and we're done.
"All in all, Haredi women are working, the employment of Haredi men is advancing too slowly but progressing. I can't force them in places where they haven't learned core to learn core, it won't work. I think that a hungry and poor child will no longer integrate into the labor market, on the contrary, and you see this in all the studies. When a person lives a better life of well-being, he opens up to the world and wants even more, he integrates more."
So the budget department was wrong?
"I think the budget department is wrong, I work with them very well. I love them, appreciate them, and never block them from taking out their papers, as a true Democrat, but in the end I have to decide. That's my authority and that's my job."
Head of the Budget Division, Yogev Gradus, Photo: Oren Ben Hakon
And do you trust that this will help their integration?
"I do come from a public that serves in the army, integrates into the job market, but I also admire their dedication to Torah study, and their willingness to pay a price for it, to live a simple life of poverty, of families with many children and dedication to kindness, mutual aid and caring." However, despite his willingness to stand by the ultra-Orthodox sector, Minister Smotrich also understands that the socioeconomic future of the State of Israel requires adjustments. "I know that they also know," he says, "that on the scale of this public they have to change things."
"Do two-thirds of the economic interview," Minister Smotrich asked with a wink that contained a lot of truth, in an understandable attempt to celebrate the achievement and hide the cracks exposed in his relationship with Otzma Yehudit chairman Itamar Ben-Gvir and the ultra-Orthodox sector factions – without success.
Ben-Gvir said that you distributed money to your associates and did not take care of the Negev and Galilee, Goldknopf demanded more money and you vehemently objected. Is this the method that works? Blackmail?
"You like to create drama out of everything, these are bumps that every finance minister goes through. The coalition agreements were about NIS 70 billion, I decided to hedge them on NIS 12.5 billion, and then we added a little, and that came along with a cut because I didn't agree to break through the framework. Itamar, whom I admire, received the most in relation to the agreements. I think he made a cynical campaign about the Negev and the Galilee; there are billions in investments in the Negev and Galilee in this budget. To come and say that because your party's office has less to wipe and roll is untrue, dishonest and not collegial."
Smotrich and Ben-Gvir. Will they run together again?, Photo: Yehuda Peretz
"Threats are off limits"
But it becomes a method, Ben-Gvir and Goldknopf threatened and accepted, and this is not the first time he has boycotted.
"Threats must be off limits, this is a good government for the national camp and the people of Israel. The alternative is a left with Israel's enemies and supporters of terrorism, and therefore it must be preserved. Boycotting votes must be off limits and I think that in this matter Itamar was very wrong and everyone says he was wrong. The fact that he asked for money is fine, I hope he doesn't boycott anymore."
Minister Goldknopf, Photo: Jonathan Shaul
In light of these tensions, can we say that you will not run with Ben-Gvir in the next elections?
"There's a lot of time, the elections are three and a half years away. I have great admiration for Itamar, we work in full professional cooperation, with the budget we supported his plans so that he would succeed in the important task he took upon himself. We ran as a technical block from the outset, the fact that Otzma Yehudit and Religious Zionism are two separate parties is nothing new. If there will be a technical block again? Talk to me in three and a half years."
Do you understand the public that doesn't believe in the value of Torah study, isn't willing for the Avrachim to live at its expense, and that this harms the citizens of the entire country financially? What do you answer? Why do Avrachim receive grants and students do not?
"There are no grants. They get retro out of the magnification of knee support. You talked about increasing productivity for the economy, a student at Bezalel costs the State of Israel NIS 38,50 a year. That's our subsidy. There are students of gender, of art, we invest in them. A normal country invests in the humanities, in art, in culture. If everything is an economic prism, then let's fund only faculties oriented to productivity and productivity. I don't disparage the humanities or Bezalel, but how does he contribute to productivity by throwing paint at walls and calling it art? Those who want to study gender studies will pay for it. Why do we fund it? Because that's what a normal country does. If I fund NIS <> million for Habima, and film funds for ninety-something million, then I can fund other values as well. I fund the yeshivas much less.
Avrachim in Kollel (the subjects have no connection to the article). "Yeshivas are a central part of society", photo: Nati Shochat
"The budget for the yeshivas is about NIS 13 billion a year, and the budget for the Council for Higher Education will be NIS 5.2 billion. Tell me how much of it is really sciences etc. and how much is humanities, and that's fine. I'm in favor, woe betide us if we don't give money to culture and sports, but if I give all these things I can also give NIS <> billion to yeshivas because it's a central part of society that is in the government, we subsidize more things for the general sector and also for the ultra-Orthodox."
But a citizen who looks at the distribution of coalition funds, which are the values of the government, feels that he does not belong, because everything is religious, ultra-Orthodox and settlement.
"That's not true, we increased budgets in all ministries for everyone, on all issues. That's only one percent of the budget that reflects the values of the government because it's a democracy. I also wanted to give money to the opposition, and I saved money for it. I told them let's have a substantive discussion, raise needs, they decided to shout and fight and not take it. So there are three million shekels for family purity, oh my, I'm not ashamed of it, these are my values, I got seven seats, I'm also allowed to promote my values in democracy."
"The relationship between him and Prime Minister Netanyahu is close and daily," Smotrich told us. According to him, they see eye to eye on the economy, and the minister is also quick to deny reports that he threatened to resign as part of the negotiations over Goldknopf's additional funds. Now that the budget has passed, the legal reform that many think was buried in talks at the president's residence is back at the negotiating table.
S&P did not lower its rating forecast due to the halt of the reform, the protest weakened, will you go back to promoting it?
"The rating companies do not relate to the reform, they refer to the uncertainty created by irresponsible elements that were willing to burn down the club, and who went to the companies and asked to lower the rating, and to scare away investors based on lies about the reform. You ask me whether I am willing to surrender to people who are willing to harm the Israeli economy and threaten to drill a hole in the joint ship because they don't like democratic decisions? I am not willing to surrender to this, because if it does, it is possible to shut down the country, to shut down democracy. We were elected not on the scale, on a clear legal agenda, and I say unequivocally – the wheel of reform cannot be turned back. Had Gantz looked at the issue matter-of-factly, there would have already been agreements, but the opposition has no interest in reaching agreements and creating quiet; they just want to have a dialogue about agreements. As far as they're concerned, it's about passing the time."
But even you don't give a deadline for talks, right-wing voters think you're texting.
"Why do I need to set a deadline? I'm on the horse. The corrections that need to be made will be made. We, too, are allowed to learn lessons from past mistakes, and it may be necessary to promote this in a different way. It could be that one of the mistakes we made was exactly setting things clear, why do I need to reveal all my cards?!, we want to exhaust and reach agreements in which we need to come up with an outline that the other side can live with. For the sake of agreements, I am willing to give up a bit, to move things more slowly, to start from one part and not another, but the amendments in the legal system will be carried out. If there are no agreements, we will advance unilaterally, I don't think we need everything at once at the summer conference, and we don't need to announce before we do, but something is."
The talks at the President's House, photo: Kobi Gideon/GPO
In addition to his central role in the Ministry of Finance, Smotrich also serves as a minister in the Ministry of Defense with active powers in Judea and Samaria. While the headlines deal with the cost of living, Smotrich works vigorously under the radar to promote plans and achievements for the residents of Judea and Samaria. While he sits most of the time in the Ministry of Finance, his confidant, Yehuda Eliyahu, serves on his behalf as head of the administration established in the Ministry of Defense.
What are you promoting in Judea and Samaria? The Israeli daily Haaretz reported a directive to prepare for an additional half a million residents of Judea and Samaria.
"Haaretz made a provocative headline. We have been talking for years about a target of one million Jews in Judea and Samaria. We are now investing seven billion shekels for roads in Judea and Samaria, which will also serve the Palestinians, and in the end this is the key to bringing residents because if there are no roads and infrastructure and security on the roads, people will not come. There is no doubt that we are investing in the development of the region, but not everything is now and immediately, I am a pragmatic person."
"Tango between the political and the military"
Why was the General Order applied only to Homesh, while the Knesset passed a law canceling the disengagement to Sa-Nur, Ganim and Kadim as well?
"I don't like it. This is the decision of Maj. Gen. Yehuda Fuchs not to do it, not because he is a leftist, but because he has security considerations, and Galant did not delay it. There is a tango between the political and military echelons, as in everything you have to choose the wars, I assume that the defense minister, in the considerations he has vis-à-vis the general, chooses to conduct his wars. I think the general is wrong, but there are times when you don't want to go against the army except in cooperation."
Your plan to dismantle the Civil Administration so that the residents of Judea and Samaria will receive government services like citizens inside the Green Line, the so-called de facto sovereignty, where does that stand?
"We're not going to dismantle the Civil Administration, we're working on an 'equal citizenship reform' in which government ministries will provide services to Judea and Samaria and we're doing staff work on it, there's a lot of coordination here with the various ministries, it doesn't change the legal status of Judea and Samaria residents."
The nuclear facility in Isfahan, Iran. 'Number one threat in the region', Photo: Reuters
We hear security warnings about Iran, what is your attitude?
"Iran is nuclear and there is no doubt that this is the No. 1 threat in the region to the State of Israel, and without going into too much detail, the State of Israel and the defense establishment are preparing for this in the most serious and professional way possible, the budget also reflects this, we increased the IDF's budget by six billion shekels a year in order to respond to these challenges. There is an international political discourse on this issue, which is not correct to elaborate, this is how we have to look at everything that happens, Saudi Arabia, security incidents of one kind or another, and I believe that with God's help we will come prepared to deal with this challenge."
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