Bank of Israel Governor Stanley Fischer backs Defense Ministry´s assertions that they have met all requirements so far under efficiency drive • Finance Minister Steinitz pushes for further cuts, says "military budget of all our Arab neighbors combined is smaller than ours."

The Defense Ministry went on the defensive on Wednesday as it presented its position on the efficiency measures it has already implemented as discussions began on the next national budget.

Brig. Gen. Reem Aminoach, the head of the Defense Ministry´s Budget Division and acting financial advisor to Chief of General Staff Lt. Gen. Benny Gantz, said Wednesday that the scope of the efficiency measures and the funds made available for the growth of the defense establishment between the years 2008 and 2012 stood at 9.4 billion shekels ($2.33 billion). According to Aminoach, the defense establishment has upheld its end of the Brodet Commission´s recommendations on fiscal efficiency. Under the recommendations, the defense establishment had to show NIS 10 billion in savings during the first five years and NIS 20 billion over the next five-year period. Aminoach presented the efficiency measures implemented by the Israel Defense Forces and the Defense Ministry in the areas of procurements, projects, construction and manpower, which are expected to result in savings of NIS 30 billion by 2017.

The on-going tension between Defense Minister Ehud Barak and Finance Minister Yuval Steinitz was palpable during the meeting. According to the defense minister, "The trend of the last few years is a welcome one — with budgets for the civilian ministries increasing, as opposed to the budget for the Defense Ministry — and we are in favor of that continuing, as long as the Brodet Commission´s multiyear budget guideline for the defense establishment is maintained. We are not asking for additional funds, only that we are required to meet the Brodet Commission´s goals in a realistic manner."

Steinitz, for his part, replied that "We are in the midst of an economic storm, and the Brodet report also took a recession into account. The defense budget is the largest it has been in the history of the state — over 60 billion shekels. All of the ministers think that the Arab states are in an arms race — this is incorrect, the opposite is true. The military budget of all our Arab neighbors combined is smaller than ours."

Surprisingly, Bank of Israel Governor Stanley Fischer opposed Steinitz´s position, saying, "The finance minister won´t like what I´m about to say: The Bank of Israel has checked, and the defense establishment has met all of its requirements outlined in the Brodet report." However, Fischer emphasized to the other ministers, "If you increase the defense budget it will hinder the economy´s growth."

At Wednesday´s discussions in Tel Aviv, Prime Minister Benjamin Netanyahu said that he wanted all his Cabinet ministers participate in the discussions, so that responsibility for the budget cutbacks doesn´t fall solely on Barak and Steinitz. Netanyahu also said that in addition to deciding how much money to allocate toward the defense budget, the Cabinet would also need to decide where specifically to invest the funds. The prime minister tied his statements to the Iranian nuclear issue and to the changes taking place in the Middle East, saying "we must also respond to the historic changes that are taking place around us."

"We must be ready for the changing threats that are being directed at the State of Israel. We must see to it that the security which Israelis have enjoyed over past three-and-a-half years continues under the changing conditions," said Netanyahu.

The budget debate will kick into high gear after the Jewish festivals in September when the Knesset resumes.