Israel's far-right, Finance Minister Smotrich defends illegal settlement funds as 'economic disaster' looms

Israel's far-right Finance Minister Bezalel Smotrich hit back at critics of the government's proposed war time budget on Monday, ahead of a vote that has already created a rift between centre-right and far-right members of Prime Minister Benjamin Netanyahu's cabinet.

On Sunday, centre-right Minister Benny Gantz demanded that Netanyahu remove all political payouts from the new budget, saying they will harm Israel's efforts in the brutal war in Gaza.

Those include so-called "coalition funds" intended for settlements in the occupied West Bank and for the ultra-Orthodox Jewish education system.

Settlements are deemed illegal under international law, despite the West Bank being populated by thousands of Israeli settlers who have gone on to carry out violent attacks on Palestinians over the decades.

Smotrich said the funds going there, about 4.9 billion shekels ($1.3 billion) according to the proposal and down from a prior 5.8 billion, were being mislabelled and that they would amount to less than 1 percent of the budget. He called the criticism a deceitful campaign spearheaded by hostile media.

I’m appalled to learn that in the middle of a war, the Israeli gov is poised to commit new funds to build more illegal settlements.

This is not self-defence and will not make Israel safer. The settlements are grave IHL breach, and they are Israel’s greatest security liability.

— Josep Borrell Fontelles (@JosepBorrellF) November 27, 2023

The row over devoting funds to illegal settlements comes at delicate time for Israel which is seeking to mobilise international support for the war in Gaza, where close to 15,000 Palestinians have been killed. Homes, hospitals and refugee camps have been relentlessly targeted and bombed, drawing criticism from right groups who said Israel#s actions amount to war crimes.

There has been deep unease, even among countries friendly to Israel including the United States, about the continual expansion of Jewish settlements into land the Palestinians seek as the core of a future independent state.

Josep Borrell, the EU's foreign policy chief, said that he was "appalled" at the funds.

"This is not self-defence and will not make Israel safer. The settlements are grave IHL (international humanitarian law) breach, and they are Israel’s greatest security liability," he said on X.

Smotrich, himself a settler who has a track record of making incendiary remarks on Palestinians, said those funds had been cut back and urged Gantz's party members to "come to their senses" and vote for the budget, even as the allocated funds drew ire abroad and anger from Palestinians.

Economists have also warned that Smotrich's approach to the budget could lead to economic disaster for Israel, which is raking up billions more dollars in costs due to its war on Gaza, which has cost at least 15,000 Palestinian lives.

A spokesperson for Palestinian President Mahmoud Abbas said more money going to the settlements in the occupied West Bank, as Israel wages war against Hamas in Gaza, would have dangerous repercussions.

Gantz on Sunday said that should the government meeting take place and the budget remain as is, his faction would "vote against the proposed budget and weigh its next steps".

The former defence chief, who has emerged as Netanyahu's primary political rival, left the opposition to join him in a small-forum war cabinet shortly after Israel began its indiscriminate military campaign in Gaza.

Under the coalition agreement, Netanyahu stuck with Smotrich and the heads of other religious and far-right parties after last year's election, billions of dollars are due to be set aside for ultra-Orthodox and far-right-wing pro-settler parties.

Israel's central bank and hundreds of economists have also called on the government to scrap funds not vital to financing the war.