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.