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Israel Defense Forces Chief of Staff Gabi Ashkenazi apologized Wednesday for lashing out Prime Minister Benjamin Netanyahu during a discussion on the previous day over the 2009-2010 budget.

"The comments were uttered under the influence of heated emotions, without any intention to hurt either the Prime Minister or any of the ministers present. If my words caused any harm, then I regret them and feel myself obligated to apologize for them," Ashkenazi said in a statement he released.

During the debate Tuesday, Ashkenazi erupted over a treasury proposal to raise the retirement age for career noncombat officers. "Career officers are not contract laborers!" he shouted.

"That language is unacceptable to me," said a clearly upset Netanyahu. Ashkenazi retorted: "So don't accept it!"

According to IDF sources, Ashkenazi's anger stemmed from the fact that he, Netanyahu and Defense Minister Ehud Barak had agreed Monday night that the retirement proposal would not be discussed at the cabinet meeting, but would instead be handled by a special committee considering other changes in officers' employment terms.

Netanyahu defends 'balanced' budget after Livni criticism

Earlier Wednesday, Netanyahu defended Israel's 2009-2010budget as being "balanced," shortly after opposition leader Tzipi Livni said he had bowed to pressure to pass it.

"The budget deals with two challenges: A global economic crisis, unprecedented in scale, and an accumulation of security challenges [of a number] the state has not known for many years," said Netanyahu during a Wednesday evening meeting in Jerusalem.

"These two challenges are competing for the same resources and, therefore, we need to combine polices of unity and balance."

Earlier in the day, the cabinet approved the budget by a near majority; twenty-six ministers voted in favor of the deal, while all four Shas ministers voted against it.

Livni, who is the Kadima chairwoman, slammed the budget and criticized Netanyahu for losing control of the negotiations over it.

"Bibi has lost control of the brakes," she said, using Netanyahu's nickname. "What is worse is that there is nobody sitting at the wheel."

"The citizens of Israel were prepared to give of their own pocket had they known that the goal was to create jobs and fight unemployment, but the public did not agree to having money taken from its pockets just so this government could survive."

After marathon late-night discussions, Netanyahu, Finance Minister Yuval Steinitz and Histadrut Labor Federation representatives reached a compromise on the budget, hours before the final vote.

The NIS 316.5 billion budget plan proposes cutting ministerial budgets for 2009 by as much as 6 percent, and raising the value-added-tax by 1 percent.

Value-added tax may also be applied to fruits and vegetables for the first time in Israel's history, which would add an estimated NIS 1.8 billion to the government coffers over the next two years.

Social Affairs minister voices satisfaction over final budget

Social Affairs Minister Isaac Herzog (Labor), whose ministry had been expected to suffer a deep cut, voiced satisfaction Wednesday with the final budget.

"Most of the cuts of social services were removed," said Herzog, who had threatened to resign over the planned cuts. "The Welfare Ministry succeeded in receiving meaningful additional funds for the weaker population, including handicapped people, autistic people, at-risk children, developmentally delayed people as well as other disabled people."

The budget will enable Herzog's ministry to fully operate its plan for at-risk children and teenagers. The ministry, which stands to receive NIS 2.5 million more than it was initially allocated, will be also able to operate its community services plan for the handicapped and disabled.

Defense Minister Ehud Barak also praised the plan, saying it struck a good balance between the needs of the public and the economy. Barak said this is the first time in many years that a package deal has been struck with the Histadrut Labor Federation and manufacturers that also takes into consideration defense needs.

Barak applauded Netanyahu and Steinitz's handling of the negotiations.

The proposed budget will allow for the creation of thousands of jobs, Shraga Brosh, president of the Manufacturers Association of Israel, told Army Radio. "We bridged the final differences and arrived at an economic plan that we have been striving for over some time."

On Tuesday, officials from the defense and finance ministries had lambasted Netanyahu's handling of the budget talks.

Local authorities, meanwhile, are unhappy with proposed cuts to the education budget, and have declared a one-day strike Wednesday in 13 cities. The strike will shut down schools and municipal offices and suspend garbage collection.