"The cost of calling up 6,700 reservists approved Sunday by the cabinet is over NIS 3 million a day," a senior official in the Finance Ministry said.

"The IDF will need to cover any operations of up to a week from its own sources. The funding for an operation lasting longer than a week will be provided based on a cabinet decision."

In a meeting Sunday on Operation Cast Lead, treasury officials held their first, preliminary talks with their counterparts from the Defense Ministry over the budgetary impact of the fighting in Gaza and the rocket attacks in the south.

The treasury's frontline troops in this war are its appraisers and officials who handle compensation for citizens whose property has been damaged by Qassams and other rockets. The 30-strong teams have been ready since last week.

The Tax Authority has set up its own center in Sderot to deal with compensation issues, and the Defense Ministry notifies it of all damage.

In the past three years, residents of the region near Gaza have been compensated to the tune of NIS 143 million for Qassam damage: NIS 73 million for direct damage and NIS 70 million for indirect losses.

Indirect losses include compensation for lost revenues or profits.

The state has taken a number of steps to ease the burden for people in the region, including for government-backed mortgages. In addition, a number of tax breaks for the region will be extended to the end of 2009, including a 25 percent tax credit for salaried workers on a salary of up to NIS 205,080 a year. The law granting such benefits, the so-called Sderot Law, was set to expire on January 1, but the cabinet is urgently trying to get the Knesset to extend it.

Half of area factories still working

More than half the factories in the area surrounding the Gaza Strip operated Sunday, despite instructions from the Home Front Command to close down some 80 plants within 4.5 kilometers from the Gaza border.

About 15 percent of the workers in those factories did not show up for work, though some were sent to work in other parts of the country instead.

Factory owners said that since the Home Front Command's instructions were not binding orders but only recommendations, they decided to open the factories, mostly to meet export commitments.

A government source explained the difference between instructions and orders in such a case - it's money. If the state were to officially order the plants to close, it would have to compensate both the owners and workers for losses and guarantee salaries. So the state chose the nonbinding formulation.

The Manufacturers Association estimates the cost of shutting down the 80 factories at about NIS 4 million a day.