"The budding recovery evident in January and February did not ocntinue in March. We are in a situation today that does not indiate the long term will be better. Botht eh security and economic situations adversely affect state revenue parallel to the need for a substantial increase in defense spending. That is a very difficult situation and we cannot claim business as usual, but we are not in a state of economic collapse," Finance Minister Silvan Shalom said today at a venture capital conference taking place in Tel Aviv.

Shalom said that growth data will be lower than projected and Q1 growth will amount to just 3% compared to the projected 4%. According to him, Q2 will be worse and growth will be just 1%. It should be noted that growth data is calculated relative to the parallel quarter in 2001, which was a very difficult year.

The Finance Minister further maintained that the economic plan, which includes budget cuts and increasing the tax burden, will be more extensive and will be submitted to the cabinet in two weeks. According to Shalom, no decisions have been made yet regarding the plan and all options are still being examined. He noted the treasury has decided not to impose a war loan, either mandatory or voluntary. According to estimates, it appears the government will increase revenue by imposing a security duty, which does not increase government debt. Shalom noted that serving reservists will be given preference and perks in the new economic plan.