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The Knesset Finance Committee announced Sunday that it is postponing its vote on the 2008 budget and the Economic Arrangements Law due to disagreements which arose between coalition members and the Treasury.

Labor Party whip Eitan Cabel circulated a petition calling for the removal of certain clauses from the arrangements bill, including the section which levies an NIS 86-per-month insurance charge on housewives. The petition also calls for the removal of the clause which stipulates that the freeze in national insurance stipends be upheld and the annual four-percent cut in insurance pensions be maintained. The Labor Party, the Pensioners, Shas, and Yisrael Beiteinu signed the demand.

Striking these clauses from the Economic Arrangements Law would subtract NIS 755 million from the 2008 budget.

Kobi Haber, the treasury official who oversees budgetary matters, warned that if the MKs succeed in stripping the arrangements bill of these clauses, the finance ministry would be compelled to make cuts in other budget clauses.

Yisrael Beiteinu demanded the Treasury allocate NIS 200 million of the 2008 budget for causes of its choosing, including NIS 120 million to hospitals in Nahariya, Safed, Tiberias, and Ashkelon.

In explaining the demand, faction chairman Avigdor Lieberman noted that Yisrael Beiteinu - unlike other factions - never signed a coalition agreement which specified the purposes for which budget funds could be used.

The finance committee chairman, Yisrael Beiteinu MK Stas Misezhnikov, refused a demand which would have obligated his faction to oppose all reservations of the budget and the arrangements bill.

The Pensioners Party declared it would not rescind its demand to reverse the freeze on National Insurance welfare payments, stating that "it would take this issue to the limit even if it means leaving the coalition."

The coalition has pressed Pensioners whip MK Yitzhak Galanti, who currently occupies the chairmanship of the Knesset's Labor and Welfare Committee, to call a meeting of the panel so as to approve the continued freeze on welfare payments.

"There's no way that we, who were sent by the elderly segment of the public to protect it from the Treasury's cuts, be the ones to lend a hand to such a cruel measure which harms the most needy sector of society," Galanti said.

Labor MK Avishai Braverman said he would introduce a proposal which would raise the target budget expenditure to 2.5 percent, an increase from its current level of 1.7 percent. Braverman received backing from Labor colleagues Orit Noked and Shelly Yachimovich as well as opposition MKs.

Should Braverman's reservations be approved by the Finance Committee, the Treasury could pull the budget from the table. Braverman said that an additional NIS 1.8 billion will be distributed to a number of causes, including aid for the elderly, health, education, and the country's poorer areas in the north and the south.

In addition, Meretz MK Haim Oron continued to hold talks with Treasury officials on augmenting the "health basket" of medical services by NIS 130-150 million each year until 2013.

Coalition chairman MK Eli Aflalo (Kadima) is lobbying the Treasury to allot an additional NIS 150 million to the Ministry of Industry, Trade, and Labor's Investment Center.

Despite the latest impasse, Knesset observers predict that the budget and the arrangements law will pass their second and third readings by the end of the month. Should the budget not be approved by then, the state would operate within the parameters of the 2007 budget, which is relatively austere, for the first three months of the year. Should the budget fail its second and third readings by March 31, 2008, the Knesset would dissolve and general elections would be held, a scenario which the coalition parties do not want to see realized.