Labor Party Chairman and Defense Minister Amir Peretz on Friday criticized Finance Ministry officials on their claim that the country's poor cannot be aided due to the need to increase the defense budget, calling the claim "criminal."

In a meeting with Pensioners' Party Chairman, Minister Rafi Eitan, Peretz said, "There is no connection between tanks and senior citizens, and the need for security cannot be tied to strengthening society."

Peretz said he was unhappy that the government rejected his party's proposal to postpone the implementation of the second phase of tax reform.

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According to him, the implementation of the reform, which increases funds to workers with high salaries, could have been postponed in order to allow child and Elderly pensions to be increased.

Ministers Peretz and Eitan agreed to join powers in preparing a perennial social program to be submitted to the government and Knesset.

The Pensioners' Party is threatening to vote against the addition of Yisrael Beiteinu to the coalition, unless promises made to the party regarding the 2007 state budget are implemented.

The coalition crises broke out following a meeting between Finance Minister Avraham Hirchson and Pensioners' Party Chairman Rafi Eitan, Health Minister Yaacov Ben Izri and Pensioners' faction whip Moshe Sharoni.

Prime Minister Ehud Olmert appears inclined to support increasing the 2007 defense budget, based on his statements before Israel Defense Forces Chief of Staff Dan Halutz, Finance Minister Abraham Hirchson, Defense Minister Amir Peretz and senior officials from both ministries tatements at a meeting on Thursday.

The defense establishment is demanding an NIS 3 million increase in its budget. It is not yet clear how large of an increase Olmert will support.

Increasing the 2007 defense budget would require cutting back on other budget clauses or finding altenate sources of funds.