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Every now and then, politicians complain bitterly about treasury officials. These officials are the plague of the economy, they complain. They decide, they dictate, they have all the power, while we publicly-elected officials grit our teeth and cannot get anything done.

The public hears and believes. It even feels sorry for the ministers and Knesset members, who want to do such good things for us but keep getting blocked by those wicked officials.

Tomorrow, the Knesset will probably approve the state budget for 2007. The drafting of the budget enables us to glimpse the relationship between officials and politicians - who has the real influence, and who really calls the shots?

We are looking at two bills, in fact: the Budget Bill (which sets the scope and distribution of government expenses and the extent of its deficit) and the Economic Arrangements Bill (which determines the changes and reforms to be carried out during the year). Both are important; both shape the economy and society.

To pass the budget without overruns, Finance Minister Abraham Hirchson spent hours convincing and softening up Knesset members. He even played a little political trick by indicating to Labor members that in order to pass the budget, he preferred to give the National Union NIS 100 million, rather than give in to Labor's billion-shekel demands. The trick worked, and the budget is expected to pass without overruns or additional allocations to coalition members.

But the big story is hidden in the Economics Arrangements Bill. The budgets director initiated a small, non-revolutionary bill because he understood Hirchson was not built for all-out war or Benjamin Netanyahu-style revolutions. This did not stop Ehud Olmert from canceling a few of the proposed changes, arguing that "they weren't politically viable."

Ultimately the cabinet voted on a rather shriveled Economic Arrangements Bill. But that was nothing compared to how the Knesset members gutted it.

The moment the bill reached the Knesset, various interested parties started pressing, persuading and promising - shrinking it further and further. Its most important reform - setting up sewage and water corporations - was dropped. It was intended to save the environment and us from the rivers of sewage flowing into the ground water we drink, but the mayors of the large cities didn't want it. They pressured the House Committee members to oppose it, and the Prime Minister's Bureau pressured Kadima MKs to give in to the mayors, because of their great importance in setting up a municipal base for Kadima.

Avigdor Yitzhaki (Kadima) and Yoram Marciano (Labor) enlisted the mayors' help, and thus small politics wiped out an important reform. The officials were crushed by the politicians.

The second important reform removed from the law would have improved the health maintenance organizations' administrative structure, enabling the tens of billions of shekels they receive to be managed in ways that better suit the public. But senior doctors joined the Histadrut in objecting to the reform, and it was dropped.

Then the bailiff's reform, which would have enabled people to pursue debts without lawyers' assistance, was revoked. Two other health reforms were also dropped: one permitting the Health Ministry to increase the list of over-the-counter medicines, which would have lowered prices, and another streamlining the system by allowing nurses to administer certain medicines instead of doctors.

Treasury officials also failed to cancel the wage subsidy for gas stations, although they proved that gas station attendants receive minimum wage, so the entire subsidy goes to station owners.

What has remained, then, of the law? Only a few minor changes - a new procedure for setting water prices, a limited anti-trust regulation for the airline industry and toughened unemployment criteria for people under age 28.

The big failure derives from the prime minister and finance minister's lack of control over the coalition. On the face of it, this is a broad, strong 78-member coalition, and none of its members want to break it up. But in fact there is no coalition; every MK votes as he wants, and there is no discipline. From the moment they enter the Knesset, all the MKs are busy campaigning for the next primary. Only those who are loud, radical and vote against the government get headlines, which are the political oxygen.

The prime minister has a coalition head, Yitzhaki, who cannot control the coalition but wants to topple Olmert, while Labor, which is part of the coalition, is acting as though it were in the opposition. The result of this sick situation is that the Economic Arrangements Bill has been castrated and degraded. It has become the smallest, most insignificant Economic Arrangements Bill ever. The treasury officials failed. The public lost. The small politicians won.