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It will take more than NIS 1.85 billion in payouts to coalition parties to pass the 2008 state budget and supplementary Economic Arrangements Bill.

The allocation of funds will be as determined by Shas, Labor, Pensioners and Yisrael Beiteinu in the coalition deals they negotiated with Kadima. As a result, the Finance Ministry will have to slash the 2008budget and utilize unexploited line items.

The Knesset Finance Committee met late Sunday night to approve the Economic Arrangements Bill ahead of its passage Monday, and the budget of NIS 301 billion ahead of its passage on Wednesday in second and third readings in the plenum. The meeting was still in session as of press time.

It was scheduled for earlier in the day but was delayed by a crisis between Kadima and Labor after MK Avishai Braverman (Labor) submitted an objection that would increase target spending for 2008 from 1.7 percent to 2.5 percent over the 2007 budget. Braverman was joined by fellow Labor MKs Orit Noked and Sheli Yachimovich, as well as opposition parties such as Likud.

The coalition demanded that Labor remove its objection as a condition for holding the votes, warning that if the Finance Committee approves the objection it could cause the Finance Ministry to pull the budget.

Treasury wages director Kobi Haber, threatened Sunday to cut the state budget if the Knesset does not approve the social spending cutbacks designed to increase state income or reduce spending.

Haber said that once the government spending framework was set it would not be possible to add funds and to cancel others.

"We will not increase the spending target in the budget," Haber said.

"The budget will not be able to pass if we cannot keep within the budget frameworks. If the Knesset decides that it wants to remove items from the Economic Arrangements Bill, we will have to propose imposing cuts that you will later regret."

The 2008 budget includes a substantial increase in the basket of subsidized medical services. In 2008 the basket will be NIS 450 million, instead of the NIS 300 million initially proposed by the treasury.

In addition, the treasury will allocate NIS 50 million for vaccinations.

Another major budget increase goes to the Israel Investment Center, which will double its allocation from NIS 150 million to NIS 300 million.

The Capital Investment Law, which is set to expire at the end of this month, will be extended by half a year, as the treasury demanded.

The planned cut of NIS 100 million in funding for elections to local authorities will be canceled.

Other items that payouts to coalition parties will go toward revoking: a health tax on homemakers (NIS 450 million); a 4-percent cut in National Insurance Institute allowances (NIS 180 million); and the freeze on cost of living updates for NII allowances (NIS 125 million).