Binyamin Netanyahu
Binyamin Netanyahu Flash 90

Prime Minister Binyamin Netanyahu rejected criticism on Wednesday of an NIS 1.6 billion dollar hike in Israel's defense budget.

"We have to keep the balance and defend our citizens and our budget," the prime minister said at a Kadima-initiated discussion called "Netanyahu government's failures."

"There is no defense without a good economy; defense costs a lot of money," he said.

Netanyahu's comments were in response to criticism from leftist politicians who say he is ignoring the socio-economic changes demanded by some citizens last summer.

The debate comes amid an intense internal brouhaha between Finance Minister Yuval Steinitz and Defense Minister Ehud Barak over transparency in defense spending and attempts to "cut the fat."

Barak has long championed high-ticket procurements that his own military commanders have criticized as draining much needed funds from Israel's mainline ground warfare units responsible for defending Israel's borders.

Even with the budget increase, Israel's navy has scrapped plans to buy two next-generation missile ships and the IAF is reportedly considering dropping plans to purchase 75 F-35 stealth fighters in favor of cheaper F-15 and F-16 models.

In addition, Israel's navy plans to finance two new smaller Sa'ar 4.5-class missile corvettes built in Israel by retiring two older Sa'ar 4 vessels.

In 2010, the air force, which will be key to any conflict with Iran, ordered 20 Lockheed Martin F-35 stealth fighters worth $2.75 billion to maintain its long-held supremacy in the air. But delays in the F-35 program mean Israel may not get the jet until after 2017.

That, combined with the naval cuts, has put Barak's plans to expand Israel's strategic ability to operate in what defense planners call the "third circle" - the Red Sea, Persian Gulf, and Arabian Sea into question as tensions with countries in that region mount.

Not only is Israel eyeing Iran, but the Saudi-led Gulf Cooperation Council is moving to form a diplomatic and military union - and to expand its ranks to include countries on Israel's borders.

As a result, advocates for increased defense spending say, the hike is not sufficient to underwrite what Israel's military may be tasked to undertake in the coming years. Israel's defense budget is 6.9% of its GDP. While higher than many countries, it remains almost 11% lower per capita than defense spending in the United States.

Netanyahu told his critics the defense budget increase had no bearing on the implementation of recommendations for socio-economic reform by the Trajenberg Committee.

"We are still passing [the Trajtenberg recommendations] chapter by chapter. We passed the taxes, the competition and articles on making the government more efficient," Netanyahu explained. "We haven't forgotten housing." 

Netanyahu also took aim at his most vocal critic, opposition leader Tzipi Livni, whose Kadima party ruled the last government coalition.

"I didn't see these benefits when you were in charge," Netanyahu told her.