What's happened
Israel's Knesset approved a NIS 662 billion ($205 billion) budget after negotiations, with defense spending set at NIS 112 billion. The budget faces opposition over tax hikes and allocations for Haredi communities, risking early elections if not approved by March 2026.
What's behind the headline?
The approval of Israel's 2026 budget underscores the government's focus on security and economic reforms amid political discord. The budget's defense allocation of NIS 112 billion is less than initially sought, reflecting compromises driven by internal disagreements. Smotrich's push for reforms targeting monopolies and lowering living costs signals a shift toward populist economic policies, but opposition leaders warn these measures will increase taxes and burden middle and working-class citizens. The budget's passage, amid cabinet infighting, highlights the fragile unity of Netanyahu's coalition. If not approved by March 2026, early elections will be triggered, potentially reshaping the political landscape. The budget's emphasis on reducing living costs and increasing competition aims to address long-standing economic grievances, but its success depends on overcoming opposition and implementing reforms effectively. The political stakes are high, with the government balancing security priorities against social and economic pressures, and the outcome will significantly influence Israel's policy trajectory in the coming year.
What the papers say
The Times of Israel reports that the budget was approved after negotiations between Smotrich and Katz, with a focus on defense spending and economic reforms. NY Post highlights the political tensions and opposition criticism, emphasizing the risks of early elections if the budget fails. Reuters notes the legislative process and the government's focus on reducing living costs and increasing competition, with Prime Minister Netanyahu asserting the budget's responsibility and balance. The articles collectively reveal a government navigating internal disagreements, security needs, and social demands, with opposition figures warning of increased taxes and social inequality.
How we got here
Israel's government has been working to pass its 2026 budget amid political disagreements and security concerns. The budget includes defense allocations, tax reforms, and social spending, with negotiations between Finance Minister Bezalel Smotrich and Defense Minister Israel Katz shaping its final form. The process is critical to avoid early elections, scheduled for October 2026, and reflects ongoing tensions over military, economic, and social policies.
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Benjamin Netanyahu is an Israeli politician serving as Prime Minister of Israel since 2009, and previously from 1996 to 1999. Netanyahu is also the Chairman of the Likud – National Liberal Movement.
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Bezalel Yoel Smotrich is an Israeli politician. The leader of Tkuma, he is currently a member of the Knesset for the Yamina alliance.
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