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The cabinet unanimously approved the first two-year budget in Israel's history yesterday at its first regular Sunday morning meeting. Finance Minister Yuval Steinitz proposed that the 2009 and 2010 budgets be approved by the Knesset at the same time and together as a single package.

The Knesset has never been presented with - or voted on - a two-year budget. However, such a move requires changing two fundamental law changes: on the Basic Law on The State Economy and the basic law governing the budget.

In addition, the cabinet wants the Knesset to approve a delay in passing the budget as well. Existing laws require the cabinet to pass the 2009 budget within 45 days of the establishment of Prime Minister Benjamin Netanyahu's new government, otherwise the government will fall and new elections are required.

The cabinet decided to ask the Knesset to change the law and extend the period for passing the budget to 106 days to allow preparation of the two-year budget.

The new budget will be presented to the Knesset no later than June 16, and it will have to be passed by July 15 or new elections will be called.

The cabinet requested a special recess session of the Knesset be called today to approve the required legislation involved in the changes. Steinitz will present the changes to the Knesset this morning, which is expected to approve the request in its first reading and pass the legislation on to the Finance Committee.

In the evening, the full Knesset plenum will vote on the new laws for their second and third readings.

Steinitz told the cabinet the new two-year budget reflects the emergency economic situation and the need to formulate an overall economic plan to end the recession and lay the foundation for future economic growth.

Ehud Olmert's cabinet approved its 2009 budget proposal in August 2008, but due to the early elections the Knesset never voted on it. The state has been operating on the basis of the 2008 budget since the start of the year.

Yesterday's decision will leave Israel without a new budget for almost seven months, a new record, at a time of the worst economic crisis in years.