The Knesset passed the 2007 state budget and the accompanying Economic Arrangements Bill in first reading on Tuesday, with 66 legislators voting in favor of the NIS 295.4 billion budget, and 38 against.

Members of Kadima, Labor, Shas, the Pensioners Party and Yisrael Beiteinu supported the budget. Likud, National Union-National Religious Party,
United Torah Judaism, Meretz and the Arab parties opposed it.

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Finance Minister Abraham Hirchson said: "We must maintain accepted modern macroeconomic parameters. Considering the Second Lebanon War, this budget is very good news. The best news is that growth will continue next year as well."

Coalition MKs Sofa Landver (Yisrael Beiteinu) and Marina Solodkin (Kadima) were conspicuously absent from the vote. Landver was protesting the clause in the Arrangements Bill that would freeze plans she sponsored for a hospital in Ashdod. Solodkin was protesting cuts to welfare programs and immigrant aid. "I don't see how it is possible to cut more funds from social welfare budgets," she said.

MK Shelly Yachimovich (Labor) announced that she would not support the bill in its second and third readings if cuts in old-age stipends and in assistance to single-parent families were not rescinded and if the privatization of social services were not canceled. Yachimovich voted in favor of the budget in its first reading, despite having previously presented herself as a staunch opponent of the proposal.

Due to the opposition of coalition members, several treasury proposals do not have a majority and will likely be shelved. These include freezing National Insurance Institute stipends, raising eligibility for unemployment compensation from age 20 to age 28, and canceling tax breaks for discharged soldiers employed by gas stations.

In addition, Shas and Labor are demanding increased welfare budgets.

The Pensioners Party garnered NIS 7 million in benefits for retirees in exchange for its support of the budget, and the cabinet has also promised to allocate NIS 50-80 million to members of restructured pension funds who retired between 1987 and 1996 and were harmed by the changes.