Finance Minister Abraham Hirchson will submit the NIS 300 billion budget proposals and Economic Arrangements Law to the Knesset Monday. He will be holding a news conference to present the proposals.

Framers of the budget, whose first reading is expected next Monday, predict 3.8-percent economic growth (compared to 4.3 percent this year) in 2007. The deficit is expected to reach 2.9 percent of the GDP, due to the increment to cover the war expenses.

The budget's expenditures will increase by 1.7 percent compared to those of 2006, due to an agreement with the coalition factions. The defense budget may exceed NIS 50 billion.

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Prime Minister Ehud Olmert supported increasing the defense budget for 2007, during a weekend discussion in his office. The defense establishment demanded more than NIS 3 billion, in addition to the NIS 3.5 billion defense increment that was already decided on.

Teams of Finance and Defense Ministry officials will try to draft an agreement on the additional defense allocation for 2007 before the Knesset vote on the budget.

After the legislation's first reading, and until the second and third readings, at the end of December, the treasury will discuss with the coalition factions removal of a number of controversial clauses from the Economic Arrangements Law.

For example, the proposal to freeze National Insurance allowances in 2007, including payments for the elderly, children, handicapped, divorced women, etc., is expected to be removed because it is not supported by a majority of MKs. Indeed, Labor, Shas and the Pensioners factions had pledged not to let the freeze plan pass. The Labor and Pensioners parties formed a "social front" over the weekend to fight some of the budget cutbacks.

Other controversial clauses include raising the eligibility age for unemployment payments from 20 to 28, and canceling the grant to released soldiers who work at gas stations.

Coalition chairman MK Avigdor Yitzhaki (Kadima) said Sunday that despite the criticism of the budget, he believed it would be approved.

"We'll discuss the various factions' demands for changes between the first and second and third readings," Yitzhaki said.

On Tuesday the Knesset House Committee headed by MK Ruhama Avraham will conduct a study day on the Economic Arrangements Law. Next Monday the Knesset will be asked to approve the two proposals - the budget and the arrangements - during a first reading. The Knesset Committee will then divide the Economic Arrangements Law's clauses among the committees for perusal.