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The treasury and Histadrut labor federation have begun preliminary contacts to find an acceptable compromise that will allow them to reach a comprehensive package agreement for the entire economy.

Finance Ministry director general Yarom Ariav met yesterday with Histadrut chairman Ofer Eini. At the same time the treasury is preparing to examine the Histadrut's demands and which of them the treasury is willing to accept.

Unlike past negotiations, this time the treasury hopes to reach an understanding with Eini as an agreement with labor would save the state large sums. For example, if Eini agrees, in exchange for a safety net for pension savings the treasury will ask for a freeze on public sector wages, though without cuts. This would save the state NIS 2.6 billion in the first year and NIS 7 billion over two years.

Another idea on the agenda, in cooperation with the chairman of the Manufacturers Association, Shraga Brosh, is the possibility of the state funding a six-month layoff period for workers instead of their being fired. At the end of the six months, they would return to work - if business has improved, otherwise they would be fired.

The treasury hopes the economy will stabilize somewhat in half a year, otherwise the offer basically means extending unemployment benefits by six months.

The idea is Brosh's and it seems Eini would rather invest in preventing layoffs by providing incentives to business in return for a promise not to cut jobs. For example, he recommends providing more credit for businesses.

In any case, the primary issue for Eini is still the problems caused by the crash of the markets, in particular providing help for pension savings. The treasury adamantly opposes any such help, claiming it could be much too expensive.

Eini is preparing his answer to the treasury: a general strike.

At the same time, he is working on a way to outflank the Finance Ministry by having the Knesset legislate his plan for a pension safety net.

In the face of Finance Minister Roni Bar-On's opposition to guarantee pension savings in pension funds, insurance policies and provident funds, Eini is planning on appealing to all Knesset factions to support his proposal - and he is expected to gain broad support during this primary and election season. Brosh also supports the idea.

However, Eini is still preparing for a strike or sanctions and on Monday Histadrut representatives will meet to officially approve a work dispute. After a mandatory two week cooling off period, the Histadrut could then take steps such as sanctions or a strike.

In any case, due to the political sensitivity at this time, the Histadrut expects any strike would be short and limited in effect.