השנתון הסטטיסטי החדש: בישראל חיים כ-7.8 מיליון תושבים - כ-5.9 מהם יהודים

The government approved Tuesday the emergency economic plan aimed at rescuing Israel's tottering economy by trimming the public sector and boosting the private sector .

The ministers voted for the plan, proposed last week by Finance Minister Benjamin Netanyahu, by 21 to two. National Religious Party MKs Zevulun Orlev and Effie Eitam objected, saying they were against the slashes in family benefits and tax breaks to rural areas, including West Bank Jewish settlements, a main NRP constituency.

Orlev and Eitam charged that the measures would push more than 100,000 children and their families under the poverty line while giving tax breaks to the wealthy, a method some analysts likened to British economics under former prime minister Margaret Thatcher.

Netanyahu has said the drastic measures are necessary to save the economy from the worst recession in the country's 55-year history and reverse two years of negative growth. The plan will cut around NIS 11 billion from government expenditure in 2003, mainly through dismissals and wage cuts in the public sector. "Israel has the highest ratio of public expenditure in the Western world. If we carry on this way, we'll crash," Netanyahu explained.

The Histadrut labor federation has already declared a labor dispute because of the plan, and the union of civil servants said yesterday that once the state of emergency because of the war in Iraq is over, it would be ready to launch an all-out strike of all 50,000 government employees.

Hundreds demonstrated outside the prime minister's office during the marathon cabinet meeting, protesting proposed cuts in welfare allocations at a time when Israel is facing high unemployment. The nation's largest union threatened a general strike.

Also, American Jewish leaders sent a letter of protest to Prime Minister Ariel Sharon, complaining that government funds for new immigrants and for programs to bring young Jews to Israel for visits are to be slashed, although the communities abroad have mobilized to raise funds for this specific cause.

However, Netanyahu warned that the U.S. administration has conditioned the granting of $9 billion in loan guarantees to Israel on acceptance of his program. Backers say Israel's present system of welfare makes it unprofitable for many to work, since they receive more in support payments than they would earn on the job.

The program includes public sector layoffs and salary cuts, a uniform 10-percent cut in ministry budgets except the Defense Ministry, which was affected less, and freezing most social security payments.

The plan also proposes to cut allocations for families, mortgage grants and tax breaks for rural areas. Other clauses include raising the retirement age by two years to 67 and raising taxes on national lottery prizes.

Sharon told his 22 ministers that the past two years of fighting with the Palestinians and the sorry state of the Israeli market required them to "save the Israeli economy" by voting for the restructuring plan.

"I know this plan is not easy," Sharon told the cabinet. "Some elements of it are painful, even very painful. I call on all economic authorities in the country to join hands to work together."

However, when Sharon realized that Agriculture Minister Yisrael Katz was not going to fight the planned charge on the hiring of foreign workers, he interevened, and said this charge would destroy farming in Israel. Some of the attendees felt uncomfortable at this point, as it is common knowledge that foreign workers are employed on Sharon's own farm. The charge on the hiring of foreign workers is designed to reduce the number of foreign workers and encourage employers to hire Israelis instead.

Many economists have applauded the plan, saying it is what Israel needs to prevent the economy, battered by the effects of the intifada and the global high-tech crisis, from spiraling downward out of control.

Ministers who favored the plan said they recognized the need to stimulate the economy, which suffered a drop of 1.1% in gross domestic product and an average of 10.3% unemployment last year. The trend continues this year - the government ran up a $579-million budget deficit in February, the highest 30-day overdraft on record.

Minister Meir Sheetrit said the plan was designed to create a shift from a culture of social benefits to one of labor. Since the 1980s, average annual growth has been declining and the ratio of social benefit allowances has grown. In the last decade, the number of Israelis collecting income-supplement allowances jumped from 15,000 to 150,000, he noted.

Shinui leader Tommy Lapid commended the plan, saying it is courageous and the right step to save the economy and renew growth. "They accuse us of Thatcherism, but they forget that Mrs. Thatcher saved the British economy and thanks to her it is now the healthiest in Europe," Lapid noted.

The budget will have to pass three readings in parliament before becoming law. The Knesset plenum will be convening for special meetings during its Passover recess on April 14 and 15 for the first reading of the bill. Likud sources estimate the bill will be passed into law in May of this year.

Defense Minister Shaul Mofaz had said he would oppose the plan but voted for it in the end. Responding to the Defense Ministry's argument that officers would leave if their wages were cut, Sharon said, "Being a career officer is a way of life. Both you [Mofaz] and I were there. I don't believe any squadron commander will leave because of a small cut in his wages or pension package."

Health Minister Dan Naveh withdrew his objection to the plan after Netanyahu promised him NIS 20 million in 2003 with which to subsidize more life-saving drugs that are currently not provided as part of the subsidized health basket.

Absorption Minister Tzipi Livni also decided to support the plan after she was promised the student administration would not be scratched off the budget, and that other ministries would not be allowed to cut their support for recently-arrived immigrants beyond 10%