It might not spell the end of the coalition, but the Labor Party's decision to abstain from a key vote on the 2006 state budget on Tuesday nudged the party further away from the government, senior Labor officials said. Despite a last-minute meeting with Prime Minister Ehud Olmert, Labor ministers could not be convinced to vote for the budget. The cabinet's seven Labor ministers all abstained from the vote in protest, while the 18 Kadima, Shas and Gil Pensioners Party ministers voted in favor. To cut NIS 1 billion to fund a variety of programs and projects called for under the various coalition agreements, the budget calls for a 5 percent cut in spending in all ministries, except in selected health, education and welfare programs. The Defense Ministry is asked to cut an additional NIS 150 million over and above the 5% global cut. "The budget reflects the government's new priorities," Finance Minister Avraham Hirchson said in presenting the budget. "We refrained from cuts in the social ministries, like the Social Affairs Ministry and Health Ministry, and funding for the local councils, and we reduced the cuts in the Defense, Interior and Education ministries," he said. The NIS 510 million defense cut was loudly protested by Defense Minister Amir Peretz, the Labor Party chairman, who claimed that a mid-year cut, without consultation with defense officials, was "unheard of." "It is like slamming the brakes on a train going full speed," he said. Peretz and the other Labor ministers offered a number of alternatives to the defense cuts, including increasing the deficit or raising the cap on government spending, a cap that was set by law during Binyamin Netanyahu's days as finance minister and which has remained the same despite a budget surplus. "If you don't want the cuts so badly, then defer the hike in the minimum wage by six months," Justice Minister Haim Ramon told Peretz during Tuesday's meeting. Peretz and Olmert met following the vote in an attempt to smooth over tensions and present a united front, sources close to the defense minister said. "The coalition will hold its ground and the government will remain in power for four years," Peretz said. "There is no reason to have confrontation between the defense budget and the social budgets." His words, however, could not erase increasing skepticism over his partnership Olmert, as MKs from both parties said that there was "significant distrust" between the two. Labor MKs said that their walkout was a show of solidarity with Peretz, whom many suggested was being slighted by Olmert. "The decision to abstain came about because of serious disagreements regarding the agenda behind the budget," said Tourism Minister Isaac Herzog. "Olmert is trying to make [Peretz] look bad," said another minister. "He knows that this is an impossible situation to put Amir into." Labor MKs acknowledged that Peretz has found himself in a catch-22. During the election campaign, he repeatedly said that a cut in the defense budget would be a necessary step in advancing Labor's socioeconomic platform. Olmert even took a political jab at Peretz during the cabinet debate on Tuesday, telling him, "I wasn't among those who waved around Defense Ministry budget cuts during the elections." Peretz, who was widely expected to push for the Finance Ministry if he became a coalition partner, had never expected to find himself defense minister, sources close to him said. "Peretz has bought the dream of the Defense Ministry hook, line and sinker," said one Kadima MK. "Now he can't make the defense cuts that he was screaming for six months ago." On Monday, Peretz said the cuts would weaken the country's ability to defend itself and lead to widespread layoffs. The sparing over the defense cuts comes less than 24 hours after Peretz and Olmert clashed over a supplement to the health budget. Peretz and Labor secretary-general Ephraim Sneh rallied their party to the cause and submitted the proposal by which additional funds were granted to the health budget. Although both Labor and Kadima officials said the decision had been "non-partisan," behind closed doors Labor MKs said they considered it a personal victory. Sources close to Olmert, meanwhile, said he was irked by the way in which Peretz handled the matter, specifically by an ultimatum he issued during a faction meeting Monday morning. "Labor will not be able to vote for a budget that does not have the changes to the health basket," Peretz had said then. Minutes later, at a Kadima faction meeting across the hall, Olmert announced that he was accepting Labor's proposal for the additional funds. "Olmert was very upset by Peretz's threats that he wouldn't vote for the budget," said one Kadima official. "Labor was added to the coalition to pass the first and most immediate agenda item - the 2006 budget." Kadima and Labor MKs will join the rest of the Knesset and spend the next week making last-minute changes to the budget. The Knesset has scheduled a second reading for Sunday, and hopes to pass the third and final vote by Wednesday. According to law, the budget must be passed by June 18, or new elections will be called. "I don't see Labor leaving the coalition over the budget," said Culture and Sports Minister Ophir Paz-Pines, who implied that Labor would vote for the budget in those two key votes. MKs Shelly Yacimovich and Yoram Marciano, the two Labor "rebel" MKs who absented themselves from the first vote on the budget, appeared ready to vote in favor of it in the next vote. "Our real sights are now set on the 2007 budget," Paz-Pines said. "The fight for this budget is over and done with."