Finance Minister Roni Bar-On, presenting the 2008 state budget, said Sunday that the focus for the coming year would be on education and social issues.

The 2008 budget will stand at about NIS 294 billion, making it the largest in Israel's history.

The budget was presented at a press conference held by Bar-On and two senior treasury officials, Yarom Ariav and Kobi Haber. The three were also to present structural changes planned for government ministries next year.

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Bar-On spoke in the press conference on maintaining budgetary responsibility and avoiding "Israbluff" ? an term in Israeli popular culture that essentially means manipulation.

"Israel must adopt budgetary responsibility as a way of life," said Bar-On.

"A departure from fiscal policy is possible only if there is an extreme change in circumstance. We must rid ourselves of the illusion, which has gained momentum, that we have sources of funding that can be spent on any purpose. A responsible state cannot increase its spending when revenues increase," the finance minister continued.

Bar-On said that the government needs to determine a clear order of financial priorities. "The 2008 budget is based on a clear and consistent structure. The government decided to emphasize a socio-economic agenda, and the 2008 budget reflects this policy. The budget is obviously slanted toward education."

The finance minister also said that special attention would be given to the needs of the elderly in the new budget.

"As for elementary and middle schools ? we will act according to reforms which have been agreed upon. The higher education reform will be carried out according to the Shochat Committee recommendations."

Other issues Bar-On said would be covered in the budget are teacher empowerment, the creation of an incentives package for teachers, a change in the position of school principals, an attempt to curb the brain drain and "a new approach" toward academic institutions.

The government will meet on the budget for 2008 for the last time in one week. No progress was made in a meeting held over the weekend on an impasse over Defense Ministry budgetary demands.

The ministries of defense and education have the most complaints with the new budget. The gap, for example, between the defense ministry's demands and the treasury's offer stands currently at NIS six billion.

Industry, Trade and Labor Minister Eli Yishai (Shas) warned over the weekend that if his ministry does not receive an additional NIS 750 million, he will vote against the budget when it comes up for government approval.

Yishai's misgivings have to do with his ministry's Investment Center, which he says is underfinanced. The 2007 budget for the Investment Center is NIS 130 million. Yishai says that the center has currently 476 requests for investment, equaling some NIS 14.3 billion, that have thus far not been carried out.

Funding on the basis of these requests would reach some NIS three million. If the investments are carried out, they will create more than 15,000 new jobs. Yishai said that 50 percent of the investments in question would come from abroad, and rejecting them would send them to other countries, which provide more attractive economic incentives than does Israel.

Prime Minister Ehud Olmert is expected to make an effort to strike a compromise with Yishai, chairman of Shas, because the approval of the budget by both the government and the Knesset is dependant on his party's votes.

Sources at Olmert's bureau believe that Labor will, for political reasons, oppose the budget in the government vote.

State revenues from projected taxes are expected to reach NIS 192 billion in 2008. The budget deficit will be 1.6 percent, or NIS 10.6 billion.

Inflation in 2008 will remain between one and three percent. The economy is expected to grow, according to treasury estimates, by 4.2 percent. Unemployment rates are expected to drop to 7.2 percent, and exports will rise by 4.7 percent and imports by 4.6 percent.

The minister in charge of government-Knesset relations, Ruhama Avraham-Balila, is pressuring for cuts to the economic arrangements bill and a different method of passing it through the Knesset. She claims that the economy is not in an emergency situation, and therefore the way it is currently passed - as a whole package, and not by individual articles - is no longer necessary. She called on the government to send the law along the regular legislative course, through relevant committees.