As the interim Israeli Minister of Finance, Ehud Olmert from Likud, is getting ready to present the 2006 State Budget on Tuesday, Labor party ministers are threatening to vote against the budget if it is not amended, Israeli sources reported on Monday.

Labor ministers, Israeli Prime Minister Ariel Sharon’s main coalition partners, demanded four amendments to the budget.  They demand that Olmert cancel a planned tax reduction, raise the deficit from 3 percent to 3.5 percent, increase government spending by 1.7 percent rather than 1 percent, and make a tangible increase in the amount of money allocated for development of the Negev and the Galilee.

Sources at Sharon’s office said he would not agree to the labor demand. 

Immediately following the resignation of the previous Minister of Finance, Benjamin Netanyahu, Sharon declared that the financial policy will remain the same as long as he is the premier.

The budget dispute could lead to the fall of Sharon’s government, observers say. If a no-confidence motion is launched in the Knesset over the budget, the Labor ministers, who have provided a safety net for Sharon, are expected to vote against the government.

Moreover, six out of the seven Likud members on the Knesset’s finance committee are considered to be rebels within the Likud and might also vote against the budget, according to sources clsoe to the committee.

Under Israeli law, the government has until October to present the proposed budget for the next year, and the Knesset is supposed to approve a final version by the end of the year.  If a budget has still not been approved three months into the new fiscal year – that is, by March 31 - the government must resign.

Netanyahu’s resignation came a few days before presentation of a report showing that 1.5 million Israelis live below the poverty line.  Avoiding facing the report’s results could have been one of the motives behind Netanyahu’s resignation, some observers say.