"There's a huge hole in our ship, a 6-percent deficit, the water is flowing in and I need to captain this ship," says Netanyahu. "I go on board and see all of the people of Israel. I ask each one to help me a little bit to help prevent a drowning. One deals with old people, the second is worried about poor children, and from each I ask for a little bit of material to close the hole. But there's one responsible for the ship's guns, who tells me, `I can't help because I am responsible for protecting the boat.' But it's going to sink, I shout."

Thus Benjamin Netanyahu describes his criticism of the army and the Defense Ministry, for not only not doing enough to cut the budget, but also by actually having their budget increased by NIS 2 billion, forcing Netanyahu to increase cuts in civilian ministries from NIS 9 billion to NIS 11 billion. And that is very difficult.

If we were a normal country, and not a state of generals, Ariel Sharon would have invited in Shaul Mofaz for a one-on-one meeting at the beginning of the week and said: Look, Shaul, I explained to you that we face two rings of danger. The close one is made up of Syria, Lebanon and Palestinian terrorism. The second is made up of Iraq, Iran and Libya. So something happened this week. The eastern front collapsed. There is no Iraq. Or Saddam. The U.S. is keeping a watchful eye on Iran, and George Bush is explicitly threatening Syria. Defense Secretary Donald Rumsfeld is accusing Syria of experimenting with chemical weapons and giving refuge to the senior Iraqi officials, and the Americans are even shutting down the oil pipeline from Iraq to Syria. So Assad Jr.'s situation is not so great. Don't these new facts, and the fact the Americans are physically present in the heart of the Middle East mean that the military threat to Israel from the east has been weakened? Haven't both rings of threat been weakened? Therefore, dear Mofaz, please go back to your office and come up with a new plan for how the army is reorganizing in light of the new situation, meaning how it will already cut the NIS 2 billion it recently received from me, and how it will make the necessary organizational changes this year to anchor that cut for the long run.

That conversation has not yet taken place, so we'll detail here a little of what the Israel Defense Forces ought to do, in the new strategic circumstances, and as a result of the budgetary constraints.

First of all, the number of troops has to be reduced, in other words, to significantly shrink the army. There is an agreement in principle inside the IDF to do so, in particular including Deputy Chief of Staff Gabi Ashkenazi. Then, reduce the number of headquarters that flourished and grew fat, and the number of commanding officers, and even cut women's service to 21 months.

Wage agreements with career officers must be changed. The bad norm of retiring officers at the age of 40 must end. The IDF pays every career officer two salaries: Once for their service on active duty and a second time for their years as pensioners. There must be a distinction between combat soldiers and field units and the rear units and administrative functions.

Combat soldiers should be retired early and their salaries should be higher. But why should an economist working at the kirya [Defense Ministry compound] or a clerk in an office retire at the age of 43 or 44? They could continue serving until the age of 60 without any problem, and the IDF would save a considerable amount and gain their experience.

The reality on the ground is even more brutal. Instead of a wage differential, with combat soldiers earning more, the reality is that a lieutenant-colonel in the kirya has all the time in the world to get a college education and a master's degree from one of the universities (or more easily from one of the foreign schools with branches here) and thus earns more than the combat officer who doesn't have time for school and won't get the "education bonus."

A window of opportunity has opened to the army to enter a new era in which it behaves according to economic parameters. The IDF should issue tenders to the private market for all the construction, maintenance and services. That would be good for the economy and good for the army. Suddenly it would turn out that the army could get the same jobs done at half the price. And now is the time for these efficiency measures, because more chances can be taken now because of the collapse of the eastern front.

The IDF has not yet moved to aggregate pensions, and continues to argue over every aspect of the issue, even though the rest of the public sector has made the change. Career officers still have not started paying the full cost of health insurance because the most powerful works committee in the country - the IDF's top tier - is against it. And the treasury-appointed accountant still hasn't begun working. In other words, there's a lot of work to be done in the army, particularly coming to terms with the fact that they are part of the economy, that military power depends on economic power, and they need to take into consideration that there is a large hole in the bottom of the gunboat.