Defense ministry foot-dragging on paying its bills will cost 5,000 workers their August salaries, warns Manufacturers Association president Oded Tyrah.

August salaries are payable under law by September 10. But the Defense Ministry has been sitting on payments for over two months, Tyrah charged, and now owes suppliers about a billion shekel.

Small and medium-sized companies cannot bear heavy burdens of credit to the government, the association says. The companies in question supply a huge range of products from textiles to footwear to food to metals and electronics.

Tyrah called on Prime Minister Ariel Sharon to personally intervene.

A month ago, in a meeting with the umbrella organization, Coordinating Council of Israel's Economic Organizations, Sharon heard of the problem and ordered the Finance Ministry to stop delaying payments to suppliers.

Despite the PM's order, nothing happened, Tyrah accuses, and the state has remained in breach of its contracts. While the Finance Ministry and Defense Ministry exchange blame, thousands of people are going broke ahead of the Jewish holidays, Tyrah said.