Finance Minister Silvan Shalom and his top advisers will meet with Defense Minister Binyamin Ben-Eliezer and his senior men Sunday in an attempt to reach an agreement over the cuts to the 2003 defense budget.

Treasury director-general Ohad Marani, head of the budget department, Ori Yogev, andd deputy chief of the department in charge of the defense budget, Kobi Haver will attend the meeting, as will Defense Ministry director-general Amos Yaron and the financial adviser to the chief of staff, Brigadier General Muli Ben Zvi.

The treasury is hoping to reach a quiet agreement with the defense establishment, as it has in previous years. The Finance Ministry is due to present the reduced defense budget to Prime Minister Ariel Sharon in the coming week.

Ben-Eliezer and his director-general said last weekend that they would in fact be seeking more funds for the defense budget because of the continuing intifada and the tensions along the northern border, and that they would not agree to any cuts to their ministry's budget. Should the defense and finance ministries fail to reach an agreement, it will be up to Sharon to make the final decision.

The treasury is looking to cut NIS 8-9 billion from the 2003 budget, including NIS 2-3 billion from the defense budget. During the wrangling over the cuts, the treasury is hoping to raise the issue of the need to reform the defense establishment, including a reexamination of the traditional division of labor between the IDF and its branches, the police force and the Border Police.

An additional reform the Finance Ministry is seeking to push, as soon as next year, is a switch from a guaranteed pension plan to one where the employee contributes toward his pension. This could save the state coffers billions of shekels over the years. State workers completed their move to this system earlier this year, and the treasury believes that the time has come for the defense establishment to do the same, even though the benefits are long-term, rather than immediate.

Defense and treasury officials have been discussing this issue for many years. The defense establishment believes that it will significantly cut into its employees' monthly wages, as they will have to pay toward their pensions. The result of these years of discussions is that the defense establishment and the treasury had an unwritten agreement that the defense establishment would be the last members of the public sector to switch to this pension scheme. The treasury is now seeking to cash in this agreement.