A vote on the Israel state budget has been postponed as the government struggles to head off a threat by the Foreign Minister, David Levy, to resign.

Mr Levy says the draft budget will harm the poor and that he will vote against it before handing in his resignation.

The Israeli government has put off the vote until Sunday to buy time for the Prime Minister, Binyamin Netanyahu.

Mr Levy heads the five-member Geshar faction in Israel's ruling coalition and has threatened resignation before.

David Levy says Mr Netanyahu has not advanced peace under "threats" from coalition members

He said the Mr Netanyahu had not kept his promises, including measures to ease unemployment, increase housing subsidies to poor families and add more classroom hours.

"The signature has no value, the commitment has no meaning. There is no sensitivity," said Mr Levy.

Costly demands

The Government can pass the budget without Mr Levy's vote but Mr Netanyahu knows his 66-member coalition is so fragile he cannot risk losing him.

Prime Minister said to be determined to pass Budget

But he may be forced to choose between his Foreign Minister and the Finance Minister, Yaacov Neeman, who has threatened to resign if his Budget is not approved.

Mr Neeman has already had to cope with a long list of costly demands from coalition partners.

He told Parliament he had agreed to 1.2bn shekels (£205m) in extra spending to win support for the Budget - but this sum does not include concessions to Mr Levy's party.

The Finance Minister has vowed not to introduce new taxes or increase the Budget deficit but a BBC correspondent says political pressures are clearly mounting.

A Government shutdown is unlikely, however, as the 1997 Budget framework remains in force for three months. But if a new Budget is not approved after March 31, the administration automatically falls.

The Prime Minister's spokesman said: "The situation is very sensitive at this point but we hope the differences, which are after all not fundamental, will be settled within the next few hours."

US presses for pullback

Key provisions of the Budget have met strong opposition, forcing Mr Netanyahu to back down on reforms and cut deals with coalition partners.

Right-wing coalition legislators were also threatening to oppose the Budget to wring concessions from Mr Netanyahu on a promised West Bank troop redeployment.

The US is pressing Israel to carry out a pullback promised in a 1995 interim peace deal.

Some right-wing legislators want to stretch out the Budget discussions until March 31 to put pressure on Mr Netanyahu not to make concessions to President Clinton at their meeting in mid-January.

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