Just two weeks ago, Prime Minister Ariel Sharon's people boasted they had found the magical solution - running the country by means of two coalitions: a left-wing coalition that would provide them with the disengagement, and a right-wing coalition that would support the budget.

But reality is less sophisticated. On the day of the test, on Wednesday, it emerged that Sharon did not have a coalition to see the budget through its first reading in the Knesset. Lawmakers from both the government coalition and the opposition demanded a particularly high price in return for their support of the budget - payment that would have broken through all the frameworks.

The extent of the demands is estimated at around NIS 3 billion.

Benjamin Netanyahu presented the budget in the Knesset as if he were a full-time finance minister, as if he hadn't laid down an ultimatum that is set to expire this coming Tuesday. He even plans to hold a press conference on Monday on the subject of the Bachar Committee.

But while Netanyahu can still climb down from his high horse, Zevulun Orlev has no choice. He will be forced to resign from the government on Tuesday, in keeping with the decision of the National Religious Party.

Sharon will then be left with a minority government of 55 members, without the NRP (and perhaps with two supporters from the outside). Such a situation will force him to go back to the Likud Central Committee and request its approval for bringing Labor into the government. Perhaps the central committee will give him the nod this time around, because anything else would mean elections, and then the committee members, the MKs and the ministers run the risk of losing positions, jobs and refreshments.

The problem facing Sharon is that he will have to bring along to the wedding with Labor at least 24 lawmakers - no easy task.

As a prerequisite for joining the government, Labor is demanding a series of changes to the budget, such as housing grants in the periphery, an expansion of the basket of medicines, and an increase in the budgets for local authorities, research and development, higher education and the elderly. Labor's demands total some NIS 1.5 billion - but it's only the opening bid, and a deal could be closed for a much lower sum.

This isn't the budget's only malady. There is the problem of NIS 2 billion in wages, and it's clear that not all the tax exemption cancelations - VAT in Eilat, tax credit points and tax on advanced training funds - will make it through the Knesset.

If Netanyahu goes through with his threat and resigns, he will be forever remembered as a failure, as someone who started a process but fled in the middle of it, as someone who promised far-reaching reforms but didn't come through, as someone who promised a reduction in unemployment but failed to produce the goods. If he quits now, the reforms he has led will get bogged down, privatizations will not be implemented, the Economic Arrangements Law will be sterilized, the budget framework will be breached, interest will rise - and the public will never ever forgive him.

Veteran stock exchange investors know there are times in which one has to know how to cut one's losses, to sell and embark on a new path, before tumbling into an avalanche. This is exactly the situation in which Netanyahu finds himself. He must cut his losses now, come down off his high horse, return to the reforms and the budget, and work on fixing his image over the coming two years.

Yasser Arafat's clinical death may provide him with a way out.