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The cabinet approved NIS 740 million in cuts for the 2008 budget yesterday. This represents a 6% across-the-board cut in all ministries except defense and education, and the local authorities. To soften the blow, the treasury will free up NIS 314 from this year's budget reserves.

Cuts of about the same level will also be made in the 2009 budget, but the across-the-board cuts for 2009 will not apply to defense. However, the education and local-authority budgets for next year will be decreased, accordingly.

"Ministers and MKs are behaving in a wild and wanton manner. They are never satisfied and do not think twice before attacking the Israeli economy," said Finance Minister Roni Bar-On yesterday, only a short time after the cabinet approved the cuts.

Bar-On was speaking at a farewell celebration for outgoing treasury wages director Eli Cohen. Hundreds were present, including senior government officials from the past and present, and people from the private sector.

"Whoever upsets the boat will overturn it on everyone," said Bar-On, adding, "the cuts are painful for everyone, including the finance minister, but the cabinet passed its first test with respect to its ability to approve the 2009 budget."

Bar-On emphasized that the cuts were in the underlying budget, which means they will continue in future years: "This will help us in passing the 2009 state budget, which is a difficult and complicated one, and will require a redefinition of priorities."

Ministers from Labor and Shas objected to the cuts, as expected, and voted jointly.

Prime Minister Ehud Olmert intervened during the cabinet debate and decided as a compromise to release NIS 314 million from budgetary reserves. This is a well-known and often-used move by the treasury, which usually makes reserve funds available three months before the end of the fiscal year.

Bar-On emphasized during the debate that "the cabinet is facing a backlog of commitments significantly larger than the funds available, even after the across-the-board cuts. This is because of a long list of cabinet decisions, legislation, wage agreements and High Court decisions, which all have no budgetary funding for now - at a cost of over NIS 2 billion."

"Despite this gap, we chose to bring only the limited 6% across-the-board cut to the cabinet for approval, which helps achieve a balance between urgent budgetary needs and the ability of the government ministries to carry out their objectives," Bar-On said.

He told the cabinet that additional funds would only be made available during this year if projects were canceled or other cuts were made.

Olmert told the cabinet that the budget could not be increased, and that maintaining the budgetary framework was one of the main reasons for the success of the Israeli economy.

Labor Party chairman and Defense Minister Ehud Barak told his ministers in a meeting before the cabinet session: "Defense is not just the tank or plane, but the personal security of Israeli citizens and the social security of their children." After the meeting, Barak said Labor had prevented possible damage by reducing the cuts by half.