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Prime Minister Ehud Olmert decided on Sunday to add NIS 2.75 billion to the 2009 defense budget to re-equip the Israel Defense Forces after Operation Cast Lead in Gaza. This is almost a billion shekels more than the amount the Finance Ministry was willing to allocate.

In addition, the IDF will cover another NIS 800 million of the operation's costs from its own budget. Originally, the Defense Ministry had demanded NIS 4.5 billion to compensate it for the Gaza fighting, but the treasury objected vehemently, offering only NIS 1.85 billion. Defense backed down somewhat and agreed to request only NIS 3.8 billion after negotiations between the two ministries.

Both sides refused to compromise any further, and the two ministers involved, Defense Minister Ehud Barak and Finance Minister Roni Bar-On, stood firmly behind their officials.

Defense had provided the treasury with a detailed list of all their expenditures on the operation, including all the ammunition they used. However, the Finance Ministry said the demands were excessive and would require cuts in all other government offices. In addition, the treasury says there is a special reserve of NIS 800 million annually built in to the defense budget specifically to cover such cases, and the 2008-2010 reserves could cover the Gaza costs.

Olmert announced his decision in a meeting in his office on Sunday, only two days before the election, with the ministers and senior officials from both ministries and the IDF.

Olmert said the sum he decided on after studying all the figures presented by the two ministries was, "the cost of the war as I see it. If you think you are missing funds, then you will have to find them in your [budget]," Olmert told the Defense Ministry.

Last month Olmert intervened in the dispute and granted defense an initial NIS 2 billion, pending his final decision. In October 2008 Olmert gave in to pressure from Barak and added NIS 1.3 billion to the defense budget for 2008 and 2009, and most of the sum has already been transferred. Olmert also agreed to another NIS 3 billion for 2009, and defense is still demanding in addition to all these sums another NIS 3-4 billion for long-term projects - however, all these sums will have to wait for the decisions of the new government after the elections.