JERUSALEM—Yair Lapid, 49, a former television anchor and journalist, is a rising political star in Israel. He surprised Israelis in the recent election when his new party, Yesh Atid, became the country's second largest. His voters were secular young people and the middle class; their focus was not Iran but domestic affairs. Now the finance minister in Prime Minister Benjamin Netanyahu's government, Lapid spoke with Lally Weymouth this past week in Jerusalem. Excerpts:
Lally Weymouth: How have people responded to your budget?
Yair Lapid: When I introduced my economic plan for the first time, people had mixed views because it's the largest cut in the history of Israeli budgets. We have a big deficit caused by the fact that the former government took upon itself too many obligations.
L.W.: Weren't you elected to help the Israeli middle class?
Y.L.: True. Then they said, "OK, now he's raising taxes." They were upset.
L.W.: Because you raised the value-added tax?
Y.L.: Yes, from 17 percent to 18 percent and the income tax by 1.5 percent on everybody. Israel's income tax is the most progressive in the world, so when you raise it, it doesn't mean that you raise it on the poor as much as you do on the rich. But it's still a raise, and people don't like it when their taxes are raised.
L.W.: Do you think that in the long run, Israelis will look back and think that you did the right thing?
Y.L.: I'm sure they will. Even now, when they're upset, they feel better that somebody's doing the responsible thing, even if it's inconvenient politically.
L.W.: You also said that the ultra-Orthodox have been receiving benefits and payments from the government without contributing.
Y.L.: I felt that we had become a society ruled by sectors, by interest groups: Whoever's connected [to the government] gets more.
L.W.: So you felt it wasn't fair.
Y.L.: Me and apparently a lot of other people. We felt that the people who should benefit most from the country are the people who contribute the most, which is the middle class, who are drafted into the army, spend three years there and 25 years in the reserves. That is why I had enough votes to create out of nowhere the second-largest party in the country.
L.W.: You used to be a journalist?
Y.L.: Three generations of my family were journalists—my grandfather, my father, and myself. My grandfather, who came here in the early '30s, was the first journalist of Yediot Aharonth [a leading Israeli newspaper]. My father was a journalist and a politician. I worked for Yediot Aharonth, too.
L.W.: Why did you decide to go into politics?
Y.L.: My children are growing up, and I became worried about the ways things are being handled in this country. I felt there's a lost generation of people who feel misrepresented, and that they're doing their best for the country but the country is not doing its best for them. We are all looking at our children and wondering whether or not they will see their future in Israel. They looked at the country before the last elections and saw it becoming more and more Orthodox. There was a strong sense of unfairness.
L.W.: I met with a group of Palestinians who appeared so frustrated.
Y.L.: Like I am. Yes, they are frustrated. The one thing I share with them is that we all feel that things are going nowhere. Countries have to be on the move constantly.
L.W.: Do you think Secretary of State John Kerry's [peace] initiative is a good idea?
Y.L.: I think it's a good idea to have an initiative. I'm totally supportive of going back into negotiations on the basis of the two-state solution. For me, there's no other game in town but the two-state solution. The Palestinians must have their own country, and the Israelis must understand that the Palestinians should have their own country. I'm going to push for this as hard as I can because I think this is really important for Israel. I'm not doing this because I'm in love with the Palestinians. I'm doing this because I think it's in Israel's best interests to have what I call an honest divorce.
L.W.: How do you see the shape of that?
Y.L.: The most important thing is to go back to the negotiating table and talk until the white smoke comes out. I'm talking constantly to our prime minister, saying we have to be more proactive.
L.W.: And what is he saying?
Y.L.: He's been pretty consistent since this government was established in saying, "Yes, I understand that this is going to be based on a two-state solution." This is not an easy thing to say in his party [Likud], which shows that he means business because he's paying a political price.
L.W.: But nobody in the outside world believes him.
Y.L.: I know. When I was campaigning, people used to say: "How can you campaign for office? You never did anything in your life but write." I used to tell them that this is a valid complaint, but it's important for us to have the right vocabulary, and the right vocabulary is the two-state-solution vocabulary. I'm pleased with the fact that the prime minister is using this vocabulary. He knows that I'm going to push as far as I can in order to make this a reality.
L.W.: Would you pull the settlements out of the West Bank?
Y.L.: I think that eventually we will have no other option but to pull lots of settlements out of the West Bank. What we call the blocs will stay, such as Ariel, Ma'ale Adumim, and Gush Etzion, but basically, of course, if you have a two-state solution, you will pull settlements out of the West Bank. There is no other option.
L.W.: But didn't you say in a recent interview that you would be sad to see the settlements go?
Y.L.: What I was saying in this interview is that we have to take out some or lots of the settlements, but this is a sad moment for us. This is not something I'm going to be glad to see. These are good Israelis who lived there because they were trying to fulfill a dream. This dream was supported by the majority of Israeli governments, and the fact that this is not the right dream does not make this less of a tragedy.
L.W.: Both the Israelis and the Palestinians seem to feel that if something doesn't happen soon and settlement construction continues, there won't be anything left to discuss.
Y.L.: Yes, everybody's afraid that there will come a point of no return. Therefore, I don't think we have limitless time. It's always complicated because when you negotiate about anything, whoever seems to be more anxious about the timetable is going to lose the negotiations.
L.W.: But why doesn't the prime minister freeze the settlements?
Y.L.: He needs to know why is it that he's freezing the settlements. This is a big move for this government.
L.W.: Why is it such a big move?
Y.L.: Because the Likud is not even the most right-wing party in this coalition. To ask an Israeli prime minister to jeopardize the existence of his own government without knowing what the end results will be is a lot to ask.
L.W.: I don't see why.
Y.L.: Well, the former government froze the settlements for 10 months, and the Palestinians didn't come to the table for those 10 months.
L.W.: So why not do it again?
Y.L.: This is a big move. This is a game-changer. The Likud is more extreme today than it used to be, but I think the head of the Likud [Netanyahu] is more moderate today than he used to be.
L.W.: I understand that you and Trade Minister Naftali Bennett don't necessarily share the same views but that you speak often.
Y.L.: He represents the right hard-liners in this government, and we agreed on totally disagreeing [on the peace process], but we share very similar views on domestic issues—on the economy, on the ultra-Orthodox society, and about the need to make sure that there will be an equality of burden in this country. Also, we are personal friends. You expect to meet this settler, and then there's an easygoing guy who speaks fluent English, and he's very charming. We're very friendly and are doing a lot of things together. We need to make sure there's a balance between big businesses and small businesses.
L.W.: You are against the tycoons?
Y.L.: Both of us are. "Tycoon" is just a code name for rich people who misuse the system. We are determined, both Naftali and myself, to create a society that is more just: pro-business, but more equal.
L.W.: Everyone's concerned about Iran. Do you think about Iran?
Y.L.: Yes, I think about it a lot. I think the newly elected Iranian President [Hassan] Rouhani is interesting. It is probably better to have a reformer as the president of Iran, but we have to see.
L.W.: What do you think about the U.S. aid to the Syrian opposition? How do you see the situation in Syria?
Y.L.: We're worried, of course, about how unstable our borders are going to be and that we have now on our northern border thousands of al-Qaida people that penetrated Syria. Some of the forces within the Syrian opposition are worse than the government that they're fighting against. Right now, the only thing we have to do is prevent arms from going from Syria to the hands of Hezbollah and other terror organizations.
L.W.: Do you want to become prime minister one day?
Y.L.: I'm in no hurry. This government should last for the full four years. But if you're going into politics, of course you aspire to a position which is a bit higher than the one that I'm holding now.
L.W.: Is there any chance that Secretary Kerry will succeed on the Palestinian issue where so many others have failed?
Y.L.: I hear people saying, "We've been there a hundred times." But let me tell you something: We can never stop trying. It will happen. There's going to be a moment when both sides are going to all of a sudden be ready, and we have to be there when this moment happens.
L.W.: Does Israel have to create that moment?
Y.L.: We have to push forward for this moment, constantly. Whenever we tell ourselves that there's no use in trying, the possibility of peace slips through our fingers. What we have to say is, "Yes, we've tried this one hundred times, but let's try it one hundred and one, one hundred and two," until it succeeds. There's no other option. If there is another option, it's too horrific; it's [one] state of two nations, which is the end of Zionism. If we don't go for the two-state solution, this state will stop being a Jewish state.
L.W.: If you were prime minister, what would you do?
Y.L.: There's always a way.
L.W.: Do you think you could do more because you would have wider backing than this government does?
Y.L.: We are not going to wait for the next government. We are not going to stay for four years on the sidelines.
L.W.: If you delay for four years, that's four more years of settlements.
Y.L.: It's not only the settlements. It's also the demographics that are changing and not to our benefit. More and more people are despairing on both sides.
L.W.: Some Palestinians want to boycott Israel.
Y.L.: I'm not sure that this is the majority. A couple of days ago, I had here the new Palestinian minister of finance. I told him that I will do everything in my power to help [him] because this is not a political issue—it's a human issue, and we can work together. And the more positive forces that there are, the closer peace will be. So it's like everything: They throw you out of the door; you come back through the window. This is the way that we're going to be.