Two months ago, Israel stood on the brink of financial crisis. The shekel was shrinking fast, approaching the benchmark of NIS 5 to the dollar. Seeing the severity of the situation, Prime Minister Ariel Sharon and Finance Minister Silvan Shalom convened an emergency summit with Bank of Israel Governor David Klein, and decided on emergency measures to halt the deterioration.

Part of the resulting austerity plan involved interest rate hikes in three sequential moves from 4.6% to 9.1%. Another part was a steep budget cut, to decrease the budget deficit from 3.9% of GDP this year to 3% in 2003.

Last Tuesday, the cabinet approved the Finance Ministry's 2003 budget proposal including the NIS 8.7 billion budget cut, by a 14-12 majority. But the Labor Party, for the first time in the history of this government, withheld its support.

The austerity plan is not perfect. No budget is perfect, and certainly not a painful one. Many justified criticisms can be leveled against the budget and the cuts - for instance, that the prime and finance ministers, for political reasons, avoided cuts in funding to the ultra-Orthodox and the settlers.

Coalition parties and opposition alike are entitled to try to influence the budget priorities, and the cutbacks, until the end of December. That is how democracy works.

But the black clouds are likely to darken the horizon much sooner than that. The treasury fears that the 2003 budget, and with it the Israeli economy, will soon become hostages to political power struggles - which could endanger the economy and return it to the brink from which it was just rescuedif not worse.

The fear is that the 2003 budget, as ratified by the cabinet, will not be passed by the Knesset by the end of 2002.

Unfortunately, we have seen such cases in recent years, but then the Israeli economy was in far better shape. The fear is that this time, for the first time, the budget will not be approved even by the alternative deadline allowed by law of March 2003. The danger to the economy is clear.

The treasury fears such scenarios based on its reading of the political map. Defense Minister Binyamin Ben-Eliezer has resolutely stated that he will push for earlier elections than the scheduled November 2003 polling date. That would require the incumbent government to be toppled.

Ben-Eliezer cannot topple the government on security grounds: he obviously cannot ask the Knesset to vote against his own security policy. But he could derail the government and disband the Knesset over the budget.

With Labor and Shas both opposing the budget, the government does not have a majority for it - and without a budget by March 2003, by law, the Knesset must disband.

Ben-Eliezer apparently believes that the public will accept his decision to topple the government over its austerity plan. But maybe not. Maybe the public is smart enough to understand that in the current situation, you do not fool around with the most important tool for correct economic governance - the budget.