Who’s the Divisive Politician About to Head Israel’s Finances?

Daniel Avis
·5 min read
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(Bloomberg) -- He’s called himself a “proud homophobe” and said his wife shouldn’t have to recover from birth near an Arab woman in hospital. He was arrested and held for weeks for protesting against Israel’s 2005 withdrawal from Gaza. He wants Jewish scripture to have more prominence in Israel’s legal and economic systems.

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And he’s about to become the country’s finance minister.

Bezalel Smotrich, 42, is leader of the ultra-nationalist Religious Zionist party and a member of Benjamin Netanyahu’s incoming government. Technology executives have warned his policy outlook could threaten a sector that’s helped Israel take position among the world’s developed economies.

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Western officials say privately his strong support for Jewish prayer on the Temple Mount and West Bank settlement expansion, along with his rejection of LGBT rights, will cause political headaches for Netanyahu. Israel’s incoming premier however insists he will control his coalition and direct government policy.

Some Western officials have even chosen not to meet with Smotrich and his far-right cabinet colleague, Itamar Ben Gvir, unless absolutely necessary.

Those who know Smotrich say however the fears of him are unfounded. They describe a politician who intends to use his office to promote a market-based modern economy. They point to his stint as transportation minister in the last Netanyahu-led government when he successfully rolled out carpooling lanes on heavily congested roads and expanded the electrification of the railways.

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“Even his political opponents agreed that he was an extremely energetic and efficient minister, and I expect you’ll see the same qualities brought to bear as finance minister,” said Moshe Koppel, the founder and chairman of the Jerusalem-based conservative-libertarian think tank the Kohelet Policy Forum.

The new government is likely to drive change -- long-supported by Smotrich's party -- to Israel's powerful judiciary, said Koppel, whose institution also supports this. Proposed policies include measures to allow the parliament to override Supreme Court rulings with a simple majority, and to give elected lawmakers a greater role in approving judges. Critics say this could undermine Israel’s status as a liberal democracy.

Smotrich declined to comment for this article. A spokesperson said an interview he gave over the summer with Israel’s public broadcaster Kan reflected his economic views.

“Today, I think there aren’t a lot of socialists, and there aren’t a lot of capitalists,” he said at the time. “Most people are in the middle. Most people want a free market, minimum regulation, and minimum bureaucracy.”

This week Smotrich said he would pursue “a broad free-market policy,” in an opinion piece published in the Wall Street Journal. This would include removing price controls and import restrictions, “loosening” bureaucratic control over small businesses and reducing the power of labor unions, he wrote in the piece that also discussed the West Bank and judiciary.

Smotrich supports rolling back state subsidies on the cost of some basic food items – a legacy of Israel’s socialist past – and cutting the outgoing government’s taxes on sugary drinks and disposable cutlery, which have added around 0.2% to Israel’s annual inflation rate, according to a recent estimate from Meitav DS Investments Ltd. Chief Economist Alex Zabezhinsky.

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At the same time, he has suggested the state should expand the budget for religious education, something he says is crucial to help integrate the ultra-Orthodox, or Haredi, Jewish population into Israel’s economic success story.

“You have to respect their lifestyles,” Smotrich said in the interview to Kan. “The Haredi community is growing, it has needs; it knows that it has to respond to those needs, and we need to help them.”

Haredim make up around 13% of Israel’s population, and are on track to be around a quarter of the the country’s growing population by 2050, according to recent projections from Israel’s National Economic Council.

Although Haredi Jews have seen some improvement in living standards, poverty rates are still around double the Israeli average, according to data compiled by the Israel Democracy Institute think tank. Unemployment is high, particularly among men. Just 52% of Haredi men were in employment last year, compared with 86% for other Jewish men.

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Economists from Israeli and international institutions expect the next government to adopt a slightly looser fiscal stance than the outgoing government. That’s due to demands for funds from parties in the new government, including Netanyahu’s Likud. He ran on a platform promising to tackle high living costs, with inflation at its highest level since 2008.

“The coalition has no shortage of demands for funding for its several constituent groups,” Citigroup Inc. analyst Michel Nies wrote in a recent investor note. “We therefore expect some widening in the fiscal deficit, but we think even in the face of slowing growth, revenues will be sufficient to maintain the debt-to-GDP ratio on a declining trajectory.”

Critics say Smotrich’s promised free-market outlook doesn’t match up with calls for greater financial support for the ultra-Orthodox. Supporters disagree and say solving inequalities is part of this.

Every financial decision requires working out where you will take the money from, said Simcha Rothman, a member of Knesset for Religious Zionism. “If there is discrimination, you need to solve it.”

Others say the amount of money needed for satisfying Haredi interests is not huge and Smotrich will likely reach a reasonable compromise.

A trickier area may be Smotrich’s handling of the West Bank, where violence has flared sharply this year. He’ll also serve as a minister in the defense ministry and backers want him to use that role to expand settlement construction in an area the international community considers to be occupied territory.

“When there is a person in the Ministry of Finance whose agenda is right-wing, and whose entire world-view is a right-wing world-view, then I assume that he will know how to find budgets for things that are important both to him and to us,” said Hananel Dorani, mayor of the settlement of Kedumim, where Smotrich lives with his wife and seven children.

“His appointment really, really, really gives us hope.”

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