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The chief of staff has a problem this time. Every year, when the debate over the defense budget heats up, the army pulls out the latest frightening threat to the country, which leaves the government stunned and unable to implement its cutback program. A year ago Saddam Hussein and his chemical missiles played this role, but the eastern front collapsed with the fall of Saddam.

The U.S. is sitting in the middle of the Arab word and George Bush is even threatening Syria, whose army is, anyway, rusting. So what does the chief of staff have left? He can try to get the Iranian Shihab 3 back in the headlines. But even that sounds weak - the U.S. is keeping an eye on the Iranians. In other words, the ring of threats has greatly shrunk. So what will happen to the defense budget?

The treasury wants to exploit the strategic opportunity and cut NIS 4-5 billion from the defense budget. So, it is demanding the Israel Defense Forces takes a series of dramatic steps, starting with reducing manpower - in other words, shrinking the standing army by a few thousand soldiers. The IDF has agreed in principle and the chief of staff is ready to cut personnel by 6,000 over three years: 1,500 civilians working for the army; 1,000 career soldiers up to the rank of captain; and another 3,500 from the career army.

The treasury also wants to change employment conditions in the army. It's time to cancel the pensions that start at the age of 40. A senior source in the army said the norm is to retire at 45, but even so a retiring colonel gets a 58 percent pension (2 percent for each of 27 years in service - including compulsory service as a conscript! - plus 4 percent designated by the chief of staff).

The pension, therefore, is NIS 8,700 a month, for 35 years. As a result, the costs of IDF salaries are 70 percent more than what actually gets paid to the personnel while they are in uniform. There is no more generous pension in the entire economy, whether private or public sector. In addition, the new retiree gets a one-time demobilization payment of up to a year's salary, a paid vacation ranging from two to nine months, the retirees can cash in their unused sick leave and they have the option of cashing in 25 percent of their pension, tax free. All this should be ended before cutting the subsidies for people like single mom Vicki Knafo.

The treasury is demanding the army immediately implement the government decision to move new career soldiers from a budgetary pension to an aggregated one, so each new career soldier starts deducting 7.5 percent of his salary to a pension fund. The IDF refuses and demands a new, unique system, a kind of synthesis between the budgetary and aggregated pension systems, to reduce the harm to the net take-home pay.

As for the pension age, the treasury is proposing a distinction between combat soldiers and their associated logistical support crews, which make up about 25 percent of the army, and the rear units and the administrative functionaries. There is justification for combat soldiers to retire from the army at a young age, but why should an economist serving in the Kirya (Defense Ministry headquarters in Tel Aviv) or a clerk in the district liaison office get a pension at the age of 45? They can retire at 60, save the army a fortune and still capitalize on the experience they've gained. The army is only ready to consider postponing retirement age to 50-55.

The treasury wants to reduce the number of people going to university at the army's expense. It wants to cut the number of reserves days, and it wants to trim various development programs meant to increase the overall force. It wants the army to move into a new era in which economic parameters determine behavior, meaning outsourcing construction, maintenance and services to private contractors in the free market. That would enable the army to get the same jobs done at half the price it now pays.

The prime minister will decide the argument over the defense budget. Ariel Sharon will have to decide where the main threat to Israel is now located: on the socioeconomic front or the security front. Is the main danger the risk of socioeconomic collapse or an attack by the Syrian army, which hasn't been upgraded in decades? Sharon will decide whether child allowances, education, health and infrastructure budgets have to be cut, or the army's fat is to be excised.