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Last Updated: Monday, 15 September, 2003, 12:33 GMT 13:33 UK
Israel budget battle hots up
Vice-premier Ehud Olmert (left) and Prime Minister Ariel Sharon
Ehud Olmert (left) has come out against the budget plans
Plans for further massive budget cuts in Israel to cope with the country's parlous economic situation are meeting resistance from within Prime Minister Ariel Sharon's cabinet.

The draft 2004 budget calls for 10bn shekels (1.38bn; $2.22bn) in cuts, including a 3bn shekel reduction in the highly sensitive - and very expensive - allocation for defence and security.

Ehud Olmert, the Vice Premier and Industry, Trade and Labour Minister, has told Finance Minister Benjamin Netanyahu that the cuts would push Israel deeper into recession.

"I will act strongly against the Finance Ministry's 2004 budget proposals," he said in a statement released ahead of Monday's cabinet meeting to discuss the spending plans.

"The budget does not provide a solution to the most important aspects of the Israeli economy: growth and employment."

Mr Olmert said he had written to Mr Netanyahu accusing him of reneging on promises to safeguard research spending and encourage investment.

The finance ministry's swingeing cutbacks follow three years of Palestinian uprising, the global economic slowdown and a punishing recession.

Incomes were down 6.4% in the first three months of 2003 compared to the previous year, meaning tax revenues are on the slide, while unemployment stays stubbornly above 10%.


Opposition is opening up on other fronts.

Palestinian boys throwing stones at Israeli soldiers guarding an Israeli settlement in the  Occupied Territories
Defence officials say they cannot afford to relax spending
Israeli public radio reported that Defence Minister Shaul Mofaz had promised he would block the defence cuts.

The army's own radio station went further, reporting that Prime Minister Ariel Sharon had already sided with Mr Mofaz and against his erstwhile rival for the premiership, Mr Netanyahu.

Israel's number one union grouping, the Histadrut, threatens another round of strikes.

A general public sector strike earlier this year froze large parts of the Israeli economy but failed to achieve a rollback of the 11bn shekels in cutbacks included in the 2003 budget.

The unions' main bone of contention is Mr Netanyahu's planned privatisation programme, which they say will cost thousands of jobs.

In the meantime, Mr Netanyahu is backing a crackdown on illegal immigrants - whom he has termed a "cancer" - to try to free up jobs for Israeli citizens.

Thousands of people were imported to Israel in the boom years of the 1990s to keep the economy going.

But now people who have lived in Israel for years are being thrown out - despite complaints from, among others, the builders' federation, which says building sites are at a standstill as a result.

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