Olmert Vetoes IMI, Rafael Merger

Prime Minister Ehud Olmert yesterday rejected a proposal to merge Israel Military Industries (IMI) with Rafael, the state's weapons development company.

Following a meeting in his office, Olmert announced that he instead supports privatizing IMI, in line with a cabinet decision on the matter from August 2005. The merger had been proposed by Defense Minister Amir Peretz. But Olmert accepted the Finance Ministry's position, which opposed the merger and favored privatization.

Peretz announced after the meeting that he objected to Olmert's decision, and that they had agreed that the matter would be discussed at a cabinet session. He claimed that a merger is the only way to prevent the firing of workers, and that privatization would threaten the state's security infrastructure.

The treasury argued that while Rafael is profitable, IMI is losing large sums, and a merger would not solve its problems. Besides Olmert and Peretz, at the meeting were Finance Minister Abraham Hirchson and defense industry representatives.