US embassy cable - 04TELAVIV6045

C O N F I D E N T I A L TEL AVIV 006045 
 
SIPDIS 
 
E.O. 12958: DECL: 12/01/2014 
TAGS: PGOV, PREL, IS, GOI INTERNAL, ECONOMY AND FINANCE 
SUBJECT: BUDGET MAY FAIL, BUT SHRINKING SHARON GOVERNMENT 
SURVIVES 
 
 
Classified By: Political Counselor Norman H. Olsen for reasons 1.4 B an 
d D. 
 
1.  (C) The anticipated 43-54 failure of PM Sharon's budget 
late December 1, and the anticipated post-vote dismissal of 
Shinui ministers, leaves Sharon with a Likud-only government, 
but does not cause the government to fall.  Sharon can bring 
the budget back to the Knesset as many times as he wants. 
Shinui Chief Tommy Lapid remains determined at mid-day to 
vote against the budget because of Sharon's NIS 290 million 
buyoff of UTJ's five votes, despite the fact that Sharon gave 
him one "out" late November 30 with talk of the excessive 
cuts already taken by the religious community and another at 
noon December 1 with talk of possible budget allocations to 
Shinui-preferred sectors.  Lapid supposedly rejects a Shinui 
abstention, which, with possible abstentions by Shas, the 
Arabs, and two independents, would allow Sharon to win 
43-42-35, and allow Shinui to remain in the coalition. 
Lapid's rejection notwithstanding, noontime chatter in the 
Knesset is of a possible Shinui compromise. 
 
2.  (C) Sharon today has 38 Likud votes; Likud MK David Levy 
is against, and another Likud MK is hospitalized.  If the 
budget does fail, Sharon can try to buy additional religious 
votes (Shas-11, NRP-6) via budget allocations altogether 
totalling probably less than NIS 700 million.  With possible 
abstentions, that may be enough to win the necessary simply 
majority for budget passage.  If Sharon is determined to 
bring Labor into the coalition, as Shimon Peres claims, then 
he will need to address Labor's broader objections to both 
the budget and to finance reform.  Talk at mid-day in the 
Knesset and from a Foreign Ministry official is of Labor's 
demands really not being "monumental," but Labor MK Collete 
Avital told poloff late December 1 that some Laborites will 
want to re-write the budget.  Since Labor will go for 
disengagement anyway, and would make such a fractious 
coalition partner, the possibility remains that Sharon may 
string Labor along, much as he has been doing since last May. 
 Peres, and a Finance Ministry budget official who spoke to 
econoff, say Sharon would use a failed budget vote to 
demonstrate to Likud that it needs Labor.  Amid leadership 
turmoil and the return to party politics of former PM and 
Labor leader Ehud Barak, Labor has put off setting a date for 
party primaries, leaving the opening for unity talks that the 
media says are to start 48 hours after Shinui is out of the 
coalition. 
 
3.  (C) COMMENT: This could all be Sharon clearing the decks 
now for disengagement, rather than waiting until closer to 
the planned March 1 vote on first-phase disengagement.  A new 
coalition now with Labor, in particular, would also stymy 
talk of new elections -- which are opposed by some 73 percent 
of the public -- and leave Sharon clear to focus solely on 
disengagement.  If a unity government is to emerge, either 
Labor will face a climbdown from its previous budget 
rhetoric, or Sharon will have to accept further erosion of 
his budget and economic reform plans.  Sharon has 
demonstrated clearly now for some seven months that he has no 
aversion to governing from a minority coalition, building 
issues-specific, ad hoc alliances. 
 
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