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Defense Minister Amir Peretz today proposed to consolidate the Israel Military Industries with the Rafael armaments authority, which are both government companies.

Speaking at a meeting with Finance Minister Avraham Hirchson, Peretz also proposed that the government abandon any plans to privatize the Israel Aircraft Industries.

Both his proposals are in stark contrast to the government resolution to privatize Israel's military industries, as part of a broad plan to exit business entirely.

The Israel Military Industries is considered to be a problem company. The government has infused hundreds of millions of shekels into it through the last decade, and IMI is defaulting on undertakings to return government loans.

Rafael on the other hand is considered to be a successful government company. Originally the government thought to consolidate it with those of IMI's plants that would be synergetic. But Rafael has no synergy with the light or heavy ammunition that IMI makes.

The government plan calls for floating some IAI stock on the stock exchange. Peretz's position on that proposal is not known.