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Defense Minister Ehud Barak is demanding that prime minister-designate Tzipi Livni make good on the budgetary promises he received from Prime Minister Ehud Olmert. Barak says the outgoing prime minister committed the treasury to an additional, unprecedented NIS 2-4 billion in defense spending by the end of next year.

The Defense Ministry is demanding another NIS 1.5 billion in 2008, and the remainder in 2009. However, the treasury knows it has an additional NIS 3-4 billion in requests.

Barak's demands to increase defense spending come on top of the additional NIS 1.3 billion Olmert approved for the 2009 defense budget, over the objections of the Finance Ministry. They also come on top of the billion shekels the Labor Party demanded - and received - from Livni in the coalition negotiations.

The treasury was shocked to learn of the new demands, in particular due to their timing - in the midst of a global economic crisis. The treasury also claims the defense ministry is ignoring its commitments under the agreement that was made based on the Brodet Committee's findings on the defense budget. The committee determined that in return for a substantial budget increase in coming years, the defense establishment would have to become more efficient. The treasury says defense is demanding more money in the name of the Brodet Committee agreement, while it is demanding more funds in opposition to its promises.

The treasury also never stops reminding everyone that the 2009 budget is already strained, because of the expected economic slowdown in Israel and the accompanying drop in tax revenues, as well as the demands of the parties under the coalition agreements for a new government. Therefore, the treasury says it is not at all clear where the additional defense funding will come from.

A defense establishment source replied: "True, we are demanding the treasury keep the commitments made by the prime minister. It is absurd, we need to argue about matters and funds that were agreed upon. The prime minister and defense minister may have a broader view of matters than the finance minister."

The Defense Ministry claims the treasury owes it NIS 900 million in past commitments for 2008, but says it is willing to accept this money in 2009.

In addition, the ministry says it wants back the NIS 86 million taken from its budget as part of the across-the-board cut to fund increased allowances for Holocaust survivors, as the Brodet Committee recommendations clearly stated the ministry would be exempt from such cuts.

The treasury says Barak announced in the cabinet when the cuts were discussed that for such an important purpose, he would allow the money to be taken from defense.

The drop in the dollar and the inflation on items including fuel, food and other raw materials are additional reasons for the ministry's additional demands, in this case NIS 2-2.5 billion. The defense establishment says it realizes it will not receive the full sum, but the Brodet Committee set a mechanism to cover such price increases, which total an additional NIS 800 million to NIS 1 billion per year.

The Finance Ministry says that while the cabinet did approve a mechanism for compensating for inflation, it applies to all government ministries and will only start in 2010 - and that includes the Defense Ministry.

In addition, the Defense Ministry says that NIS 500 million of the Labor Party's coalition agreement funding is earmarked for defense - on top of all the other spending. Defense is also demanding money for several other things, such as for protecting communities near Gaza and gas masks, for a total of NIS 150 million in 2008 and twice that in 2009. It also wants NIS 1.5 billion for a sophisticated, electronic border fence along the Egyptian border.

All these demands come on top of what the treasury calls NIS 3-4 billion in "strategic affairs" budgets, starting in 2009.

The treasury is furious, and says defense must decide whether it will keep to the Brodet framework, or whether it just views these amounts as the basis for demanding more. Finally, the treasury says that regardless of what Barak and Olmert may have decided, the cabinet has never approved any of the additional spending.

The 2009 defense budget is expected to be the largest in Israeli history, and was planned at NIS 52 billion, but now will likely exceed NIS 55 billion.