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Finance Minister Silvan Shalom said ‎Monday‎ ‎that the government would not institute a war loan levy to finance the mounting costs of the war in the territories, but would instead concentrate on dramatic reductions in the state budget.

Speaking at an economic conference in Tel Aviv, Shalom said that the finance ministry is developing a plan for the cuts. He said he would bring the plan to the cabinet in two weeks time.

"We will sit on the plan all week and in two weeks will bring it to the cabinet and then to the Knesset," Shalom said. "There is a war that needs to be financed".

Shalom said that all of the reductions in the budget will be made in the service sector.