Israel's 2026 Budget Battle: A Political and Economic Crossroad

Israel stands at a political and economic crossroad, with the 2026 state budget facing a contentious approval process. Finance Minister Bezalel Smotrich announced that the cabinet would vote next month, yet the expected political hurdles could potentially trigger new elections if the budget is not approved by March.

Prime Minister Benjamin Netanyahu's coalition, comprising right-wing and religious factions, has faced internal divisions due to disagreements over defense spending and military service exemptions. However, Smotrich remains determined to navigate these disputes and pass the budget, emphasizing its importance at an economic planning news conference.

As the defense ministry demands increased spending due to ongoing military conflicts, the Finance Ministry plans to counterbalance with potential tax reforms, including cutting income taxes and taxing banks on excessive profits. Despite these challenges, the government awaits a decisive vote on December 4.