As ministers discuss defense spending for 2013-2017, Defense Minister Barak dismisses reports that the military wants more funding • Finance Ministry says Israel Defense Forces failed to deliver on its streamlining promises and is using scare tactics to influence ministers • Defense budget may affect outcome of state budget in the fall.

The Cabinet held a special session Wednesday to discuss the contours of the Israel Defense Forces and Defense Ministry´s budget for 2012 and the five-year period for 2013-2017. It was expected that participants would not be asked to vote on specific resolutions but the outcome of this meeting is likely to impact the upcoming negotiations over the 2013 state budget.

Defense Minister Ehud Barak and Chief of General Staff Lt. Gen. Benny Gantz presented ministers with the IDF´s procurement plans and elaborated on the projects their organizations will focus on for the next five years. The special session was held in the Kirya, the Tel Aviv complex that houses the Ministry of Defense and the IDF General Staff headquarters. The change of venue — from Jerusalem to Tel Aviv — was designed to prevent leaks on the content of the discussion because the topics covered, as well as the documents and presentations, were classified as "Top Secret," and therefore no one but the ministers were present. Director-generals of government ministries and the ministers´ staffers, who would normally be allowed to sit in on such meetings, were not invited. Ministers also had to surrender their mobile devices when they entered the room.

In a departure from the original plan, the discussion also covered the entire defense budget, which will effectively turn the meeting into a parliamentary budget hearing for the 2013 fiscal year. Finance Minister Yuval Steinitz provided the ministers with the growth outlook and revenue collection estimate for 2013 and told the ministers that the budget cuts must also apply to the Defense Ministry as a way of sharing the burden.

At the start of the meeting Prime Minister Benjamin Netanyahu told the ministers that the special Cabinet meeting reflects the unique economic and geopolitical reality Israel has to contend with. "Israel is facing ever-changing threats and we must prepare in advance. We must make sure that the security Israelis have enjoyed over the past three and a half years will persist despite the changing reality. We shall hear what the experts say and then decide on a security doctrine that will accommodate these changes."

Netanyahu also said the meeting was to focus on defense spending due to the large proportion of government expenditures that go toward military spending and other security-related matters, which in turn affect the shape and scope of the state budget. "We are beginning a discussion that has never before been held by Israeli Cabinet ministers, let alone the entire government. When all is said and done we will have to decide not only how much money will go toward defense; we will also have to decide what defense programs will be funded," Netanyahu said. "I am doubtful that we will have everything covered today, but we have to eventually finish this discussion to move the 2013 state budget forward and carve out a path for the defense budget for 2013 and for the next five years, whose ramifications will extend to the next ten years. That is why we have to address the historic changes unfolding around us."

Netanyahu went on to tout his government´s economic record, vowing to continue along the same path that has allowed Israel to weather the challenges facing the global economy. "We have taken great care not to breach the budgetary framework over the past decade and by doing that we managed to protect the Israeli economy from the effects of the global economic crisis. This has worked quite well. We have maintained this fiscal discipline over the past three years and we intend to continue doing so now."

The meeting is likely to reignite the ongoing spat between the Finance and Defense Ministries, with Yuval Steinitz on one side and Barak and his director-general, Maj. Gen. (res.) Udi Shani on the other side. The main bone of contention is the implementation of the Brodet committee´s recommendations, which have been adopted as a government resolution and are therefore binding. The recommendations call for increased IDF streamlining in exchange for additional funding. This latest round of sparring between Barak and Steinitz dates back to the fall, when the two disagreed on how to fund socio- economic reforms in Israel.

In the wake of last summer´s social justice protests, in which a record number of Israelis demanded more affordable housing and a solution to the high cost of living in Israel, the government- appointed Trajtenberg committee recommended sizeable cuts to the defense budget. The committee also proposed, among other things, higher taxes on corporations and the wealthy to pay for social reforms.

Finance Ministry officials say that the security establishment wants another 10 billion shekels ($2.47 billion) in supplemental funding despite that the defense budget has increased over the past two years by NIS 13 billion ($3.22 billion) and was spared NIS 6 billion ($1.48 billion) in planned cuts.

They also claim that the Defense Ministry has shirked its duty under the Brodet recommendations. According to Finance Ministry officials, the Defense Ministry failed to save NIS 10 billion ($2.47 billion) over the course of five years — as the committee instructed it to do — and managed to save only NIS 800 million ($198 million). The Finance Ministry says the security establishment has recently been waging what it calls a "scare campaign" in the hopes of influencing how the ministers vote on upcoming budget resolutions.

The Defense Ministry issued a statement on Tuesday saying that "due to misreporting by some media outlets, the Defense Ministry would like to clarify that the security establishment did not seek and does not seek supplemental funding."

"The security establishment still believes that the Brodet recommendations — which outlined a realistic budget until 2018 — must be adhered to," the statement read. "These recommendations were incorporated into government resolutions and were approved by the inner Cabinet."

The defense budget has been rising steadily since 2006, from NIS 46 billion ($11.39 billion) in 2006 to NIS 60 billion ($14.85 billion) in 2012. Analysts believe the 2013 defense budget will reach NIS 62 billion ($15.35 billion) but Finance Ministry officials hope it is cut to NIS 50.5 billion ($12.5 billion).

These data do not include the special U.S. funding for the Iron Dome anti-rocket system or the subsidized procurement of German-made submarines. A Defense Ministry source told Israel Hayom Tuesday that "as a percentage of the budget, defense spending is constantly going down."

Meanwhile, the 2013 budget talks are in a state of limbo with no timetable in sight. On Monday, Prime Minister Benjamin Netanyahu said that the Knesset would pass the budget in its first reading in October. The Prime Minister´s Office, however, told Israel Hayom on Tuesday that "no decision has been made on the matter."