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In an escalation of the growing industrial unrest at state-owned Israel Military Industries (IMI), the Histadrut labor federation is preparing to declare an all-out strike throughout the defense sector.

Chairman of the professional division at the Histadrut, Ofer Eini, said yesterday that the escalation was due to "the failure by the government to deal with the financial crisis at Israel Military Industries." IMI has turned to the government for further financial assistance to see it through its latest crisis. The defense company has insisted it needs NIS 350 million to continue operating, and the Finance Ministry has conditioned state aid on pay cuts and dismissals.

This aroused the ire of IMI staffers, and now the dispute, according to Eini, will extend to Israel Aircraft Indusries, Rafael (Armaments Development Authority), the country's nuclear research center, civilian workers at the Israel Defense Forces and Elbit Systems. The Histadrut plans to declare an official dispute in the sector next week, which will allow full industrial action including strikes after a two-week period.

Eini explained that the workers are not prepared to accept the dismissal of 500 workers out of the 3,000 employed at IMI. "Only three years ago, we agreed to a harsh recovery program in which 720 workers were fired or retired early and the rest took an 11-percent pay cut," he said. But the treasury is adamant. "The taxpayer has invested NIS 10 billion in IMI in the past decade and the government has no intention of continuing to spend the public's money without the [IMI] management and workers contributing to the efficiency of the company."

IMI management said yesterday that it did not have the money to pay company retirees' pensions nor to pay for employees' June wages.