The IDF is in danger of sinking into mediocrity, senior officers warned this week as defense cuts loomed. After the cabinet approved a half-a-billion-shekel cut on Tuesday, the security establishment woke up to a new reality in which officials claim it will be necessary to lay off career officers, breach contracts with defense contractors and suspend training for reservists. While the NIS 510 million cut is only a fraction of the enormous NIS 34 billion defense budget, it might spell disaster for the security establishment. Deals for the procurement of submarines, fighter planes and other technological advancements could be on the chopping block, and Defense Minister Amir Peretz has already warned that contracts the IDF would have to break could result in the firing of thousands of defense industry workers. But Peretz and Chief of General Staff Lt.-Gen. Dan Halutz take the warnings a step further by claiming that the budget cut will create a "mediocre army," placing the country in danger and impairing the military's ability to deter its enemies. Year after year the defense budget turns into a saga, with arguments erupting between defense ministers, senior IDF officers, prime ministers and finance ministers. The country, the IDF claims, does not understand the need for such a large budget and the damage that even a small cut could do. The annual budget, defense officials said Tuesday, has been reduced by a cumulative NIS 17b. since 2002. In 2002 the defense budget was NIS 39.5b., in 2003 NIS 36.25b., in 2004 NIS 35.4b. and in 2005 NIS 35b. Defense officials also make another claim - that their real budget is not actually NIS 33.5 billion but rather in the low NIS 20 billions. Some NIS 4b, officials explained on Tuesday, is allocated to pension plans for retired defense workers and another NIS 3.6b. goes to the families of soldiers killed in the line of duty, disabled veterans and military widows. Furthermore, NIS 2.7b. doesn't even come from Israel but from US military aid. So after subtracting all of the above, the security budget really comes to something closer to NIS 21b., less than the education budget. The defense establishment also says that the cut to its budget is not NIS 510m. but actually NIS 1.5b., since a NIS 1b. grant that the US was supposed to give following disengagement was never transferred, after the Americans ran into their own troubles with Hurricane Katrina. So will the powerful IDF turn into a "mediocre army?" According to some economists, apocalyptic prophesies by defense chiefs are just meant to scare the public, and Israel's geostrategic situation has never been better. In response, defense officials argue that the situation is only this good thanks to the strength of the military, which can only be maintained with a large budget.