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Prime Minister Ehud Olmert was unable at press time last night to muster a cabinet majority to pass the 2009 state budget. Sources in the Prime Minister's Office said that if there were to be no vote on the budget very soon, it was possible that he would hand his resignation in to the president.

The cabinet decided to put off the vote on the budget, as well as on the accompanying Economic Arrangements Bill, for the time being.

The ministers have still not reached an agreement on how to cut the requisite NIS 7 billion from the original NIS 319 billion budget proposal. The main argument they were having concerned how much to cut from the promised increase in the defense budget.

The Finance Ministry had proposed two alternatives: a NIS 2.1 billion cut from defense, which would enable smaller decreases in health and welfare, or a NIS 0.9 billion cut, which would require more significant slashes from health and welfare. However, the Defense Ministry not only opposed any cut whatsoever, but demanded an added NIS 2 billion - spread over two years - to compensate for the falling dollar and for the rising prices of fuel, food and other necessities.

Because of next month's Kadima party primary, and the possibility of early elections thereafter, yesterday's debate was even more politicized than usual. Transportation Minister Shaul Mofaz, one of the two front-runners in the primary, demanded that any decisions on the defense budget be postponed until a new government is formed after the primary. But his main rival, Foreign Minister Tzipi Livni, demanded that the budget be approved last night.

The Labor Party, for its part, reiterated its demand that the budget be expanded rather than cut. In addition, Labor, Shas and the Pensioners all demanded increased funding for projects dear to their hearts.

At 7 P.M., a meeting between treasury officials and the Pensioners' ministers ended without results. A subsequent meeting between Prime Minister Ehud Olmert and Defense Minister Ehud Barak, who is also head of the Labor Party, was similarly fruitless.

Almost every minister demanded a budget increase for his or her own ministry. Furthermore, representatives of various government agencies, such as the police and the prisons service, came to the meeting to explain their own needs for extra funding.

Nevertheless, defense was the main sticking point. Finance and Defense Ministry officials negotiated for hours, in parallel with the cabinet discussions, with Barak and Finance Minister Roni Bar-On occasionally joining in. But few points of agreement surfaced.

The treasury adamantly opposed compensating defense for rising prices, while defense officials equally adamantly opposed any delay in implementing the Brodet Commission's recommendations for a multiyear budget increase, which the cabinet itself approved just last year.

In his speech to the cabinet, Bar-On pointed out that both of his proposals for cutting the defense budget would still mean that next year's budget in that realm would be higher than this year's - in line with the Brodet recommendations. However, part of the increase originally slated for this year would be postponed to next year.

Olmert had opened the session by vowing that whatever happened, the meeting would finish with a vote.

"If we had unlimited funds, there is no doubt that we could all have a very nice party with the budget," he added. "But that isn't the case. There will be no increase in either expenditures or the deficit [beyond what appears in the budget proposal]."

Terming opponents of the budget "loud-mouths, barbarians and interested parties," he continued by saying: "2009 is liable to be very difficult. We must exercise restraint, stability and caution. The economy is liable to deteriorate. The cost of the instant gratification of increased expenditures is liable to be [long-term] loss ... The economy must not be subjected to electioneering games."

Livni echoed this message, adding: "Domestic politics must not be allowed to influence our votes or the economy's stability. Deferring a vote [on the budget] will broadcast a negative message to the economy. Whoever is elected in [the primary in] Kadima can make changes in the budget."