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Prime Minister Benjamin Netanyahu is fighting a multi-front battle over the budget. Treasury officials, struggling to find ways to cope with teh deficit and horrified at his agreements with labor and business leaders, are trying to block the initiatives by recruiting the attorney general. At the same time, the prime minister is under fire from top army brass over cuts to defense spending.

Israel Defense Forces Chief of Staff Gabi Ashkenazi apologized to Netanyahu late last night after a public uproar, but the treasury officials are sticking to their guns.

Top Finance Ministry officials yesterday asked Attorney General Menachem Mazuz to check the legality of specific aspects of the "package deal" Netanyahu's envoys have been putting together along with Histadrut labor federation leaders and industry heads.

Treasury officials are worried about the extent to which labor and business leaders are influencing policy, for one thing, and also at the speed at which the processes are taking place, leaving no time for proper inspection of proposed legislation.

Israel has been operating without a budget this year, with each month's spending based on a twelfth of the 2008 budget. Given the extreme delay, Netanyahu elected to institute a longer-term view in budget policy by preparing a plan for two years - 2009 and 2010. However, the negotiations have turned nastier than usual.

The prime minister's office handled negotiations with the union and industrial leaders directly, in some instances bypassing treasury officials. But the treasury's chief beef is whether the agreements the prime minister's envoys struck with the labor and business leaders, some of which found their way into the Economic Arrangements bill, comply with the law in the first place.

The treasury officials demand Mazuz check whether certain items can be enacted into law at all. Also, they want the attorney general's opinion as to whether the process bears doing quickly as the year is almost half gone already, though the issues at stake are complex and should require thorough processes.

The treasury is also questioning issues of governance, given the far-reaching nature of certain agreements.

The questions regarding legislative processes relate to 18 amendments to the labor laws that Histadrut wishes to push through, some of which are revolutionary, and all of which the federation wants included in the Economic Arrangements Law.

Under the circumstances, these changes, however far-reaching, would have to be fast-tracked without thorough inspection and evaluation by the cabinet, the Finance Ministry and the Justice Ministry.

The process is one thing, but on top of that, the Finance Ministry officials strenuously objects to some of the proposed labor law amendments. One such proposal is that policemen and prison guards be unionized under the wing of the Histadrut labor federation. Another Histadrut idea that the Finance Ministry rejects is the weakening of the supervisory powers the wages director at the ministry has over pay irregularities at the local authorities, universities, and Israel Electric Corporation.

Another trigger behind the demand for Mazuz's involvement is that both the Histadrut labor federation and business leaders want to meddle in the Finance Ministry's plans, such as raising taxes on alcohol. Because of the changes that labor and business are being allowed to introduce, the treasury also wants the attorney general to look into issues of governance and the way decisions are made in a democratic government.

The formal trigger is that the negotiations with the Histadrut on behalf of the prime minister's office were handled by Netanyahu advisor Uri Yogev.

The sheer multitude of demands included in the "package deal" could impair the government's ability to govern, the treasury suggests.

The programs that prodded labor and business leaders into action include the treasury's plan to raise "sin taxes", including on alcohol, to raise the excise tax on gasoline, to change the model by which the municipal tax (arnona) is calculated and to require the computerization of enterprise invoicing systems to eradicate false invoices that are used to dodge taxes.

The workers' representatives and business leaders are equally unimpressed by the Finance Ministry's plans to amend the rules governing deposits on beverage bottles, and to crack down on the employment of foreign workers, including at ethnic restaurants.

They also want to get rid of executive salary caps at companies dependent on government assistance.

Officials are worried that collusion between the prime minister's office and labor and business leaders on the budget could weaken the power of government.