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The hysteria in the Prime Minister's Office reached a peak yesterday. Prime Minister Ehud Olmert read the newspapers, saw the headlines about the decrees, heard the threats of the Labor Party and Shas - and got alarmed. Frightened, he folded and decided to shelve all of the plans for the 2007 budget, to which he had agreed only the evening before

Finance Ministry officials had worked until 2 A.M. to prepare the budget book, and in the morning, the printers came and started to print. But then Olmert phoned Finance Minister Abraham Hirchson in a panic and informed him that he wanted to cancel the decrees and enlarge the budget. And thus, after 100 copies had already been printed, an order was received directly from the prime minister: Stop the press. Olmert's morning of quackery had begun.

Olmert wants to survive politically. With one hand, he is repulsing pressure from the state comptroller and calls for a state commission of inquiry, and with the other, he wants to throw money at all of us - and to hell with the laws of economics and the budget limitations.

Throughout his discussions with the treasury, Olmert opposed any cuts: "This isn't the time, this isn't the place," he said to every suggestion from the Budget Division. In internal discussions, he said that he lacked the political strength to pass any cuts in the face of opposition from Labor, Shas and the Pensioners, and he was afraid that if the government presented a budget that included cuts, it would fail to pass and his government would fall.

One of his advisors, Tal Silberstein, is encouraging him to throw money with no restraint and in this way soften the anger against him in the north and among all Israeli citizens. And Olmert is prepared today to sacrifice the economy in exchange for his political survival.

Defense Minister Amir Peretz's interest is similar. He wants to regain the crown of social leadership and thus bolster himself against the rising popularity of MK Avishay Braverman. However, as defense minister, he has demanded a fantastical addition of NIS 29 billion to the defense budget. How can this contradiction be reconciled?

Peretz is solving this little problem with the help of "new equations." He declared: "I will not agree to a formula in which a tank is weighed against an elderly person and an F-16 against a child. The time has come to create new equations." According to the "new equations," the government does not have any budgetary limitations. It can do it all: spend billions on the war, rehabilitate the north and also increase social budgets.

When Peretz supported the Lebanon War, and its expansion, he did not take into account that every missile fired and every damaged tank meant fewer classrooms, fewer roads, fewer trains, less welfare and fewer National Insurance allotments. Because with the "new equations" method, anything goes. All that is needed is a good alchemist.

If Finance Minister Hirchson were courageous, he would address the public and tell the truth: There has been a war, and all of us have to pay for it. But we do not need to destroy the economy as well. We will not harm stability and growth, because this is the condition for every increase in social budgets. It is growth that fills the coffers with cash and enables the government to help the weak. Therefore, we will not increase the budget's expenditure target by even one-tenth of one percent and we will not increase the deficit. We will go through all the ministries' budgets and find places where it is possible to save, postpone and cut.

We will especially do this with the fat defense budget - with the people who are not on the front lines, the swollen commands, the sports centers, the delegations abroad, the expensive projects, the retirements at age 41. But we will also comb the education budget and clean out all the duplication and waste. And we will do the same in all the other ministries - because our public sector is big, fat, inefficient and laden with redundancy.

In a budget of NIS 230 billion, we will manage to find a few billion to replenish the Israel Defense Forces' stores, and the rest the army will do by itself, through its own housekeeping. The war is an opportunity to do a thorough housecleaning of all the ministries. It is not an opportunity to destroy the economy.

But Hirchson would never dream of making such a speech, and Olmert is not interested in leading a courageous campaign to alter priorities. Yet if we had different leaders, who would keep the 2007 budget unchanged, the world's confidence would return, the rating agencies would publish positive reports about Israel, and then the foreign investors would be standing in line - to invest.

They would realize that Israel has a serious leadership, and that a month-long war against a terror organization does not upset Israel's equilibrium. They would realize that our leaders do not want to harm the economy, especially not after a war. But for this, serious leaders are necessary. Courage is necessary. It is necessary to be unpopular in the short run in order to be an esteemed and successful leader in the long run. And this describes neither Olmert nor Peretz.