Histadrut labor federation chairman Ofer Eini said Wednesday he has ordered trade unions and public sector workers' committees to prepare for a strike next week, due to an impasse in salary talks with the treasury.

The Histadrut is demanding a rise in the salaries of some 700,000 public sector workers.

Eini and Finance Minister Roni Bar-On are set to meet next Tuesday, in a bid to rescue negotiations from their standstill.

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If this meeting proves unsuccessful, a strike will likely be held by government departments, local authorities, Ben Gurion international airport, Israel Railways, the Israel Land Administration and other state agencies and government companies, such as Israel Post. The banks, however, will not strike.

Eini spoke after meeting with the Finance Ministry's wages director, Eli Cohen, who proposed a total increase of 0.4 percent to the workers' salaries for the years 2005-2008, in return for a promise of industrial quiet until 2008.

Cohen has up to now maintained in negotiations that the state is not prepared to grant any increase to its employees' wages for two reasons. First, their salaries have seen in recent years a rise of 1.5 percent in real terms; and second, the state lacks the funds to grant an increase.

During talks Wednesday with the Histadrut delegation led by Eini and employers' representatives, Cohen said the government is ready to make an exception and give the workers an annual rise of 0.1 percent in their wages for the years 2005-2008.

The treasury's deputy budgets director, Sharon Gambashu, described the past year's budgetary necessities to the Histadrut representatives. He said increasing public sector salaries would have a considerable influence on the national budget - a one percent rise would cost the state NIS 800 million. Gambashu stated the treasury simply doesn't have the resources to meet the Histadrut's demands.

The government is currently discussing budgetary priorities for the coming year, and is looking for sources from which to provide additional funds for education, security and social projects to the tune of billions of shekels. Any increase to the public workers' salaries will have to come at the expense of these areas, Gambashu said.