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Finance Minister Roni Bar-On on Monday unveiled the proposed budget for 2009, which included billion-shekel hikes in funds allocated to defense, welfare and education.

The budget, totaling NIS 319 billion, will usher a NIS 3.1 billion increase in the defense budget, a NIS 3 billion increase in welfare and a NIS 2.8 billion increase in education.

The ministry reaffirmed its previous prediction that the annual growth rate for 2008 will amount to 4.2 percent, and the projection for 2009 stands at 3.5 percent.

At a press conference, Bar-On said that he intended to submit two budget proposals, one with an emphasis on defense, and another with emphasis on welfare services. He said he would recommend the latter, but it would be up to the cabinet to decide which proposal to adopt.

Bar-On said that he decided to go ahead with the budget despite the government's shakiness, in light of Prime Minister Ehud Olmert's announcement he would step down.

Bar-On said the country's economic security should not be affected by political upheavals.

"The Israeli economy is facing deceleration and the business sector should be given positive signals, like approving the budget," he said.

Finance Ministry Director General Yarom Ariav said that "the global downturn is more pronounced than previously thought, and it will affect the Israeli economy as well. A governmental budgetary policy is a central weapon in Israel's arsenal against it."