Netanyahu faces budget deadlock

The Israeli Prime Minister, Benjamin Netanyahu, last night faced the collapse of his economic strategy as squabbles within his coalition resulted in the government being defeated on three clauses of the 1998 budget, which must be adopted by midnight on 31 December.

By law Mr Netanyahu has three months' grace, until 31 March. If he fails to have the budget sorted out by then, he has to call new elections.

Two ministers from smaller parties, Avigdor Kahalani and Rafael Eitan, demanded that he go to the country immediately.

Mr Netanyahu and his Finance Minister, Ya'acov Ne'eman, attempted to impose a cost-cutting Thatcherite budget on a coalition that has no appetite for economic ideology.

Each faction fought to extract maximum benefit for its voters, adding billions of shekels to the bill and casting doubt on the Prime Minister's authority to force through a further withdrawal from the West Bank.

Cuts in family allowances and the health service were dropped. Vast sums were promised to religious seminaries, West Bank settlements and a growing army of unemployed. But he still failed to satisfy all the coalition all the time.

- Eric Silver, Jerusalem