Israel's parliament approveda controversial 2003 state budget in its first readingtonight despite a unanimous rejection from the Labour Party,which broke up the governing coalition.
The 67-45 vote with two abstentions occurred after PrimeMinister Ariel Sharon's main coalition partner, the centre-leftLabour headed by Defence Minister Binyamin Ben-Eliezer, walkedout in a dispute over funding for Jewish settlements.
Sharon receivedsupport from small ultra-nationalist parties in the opposition,who said they voted in favour of the budget to prevent thecountry's sovereign credit rating from falling.
An official from rating agency Standard & Poor's said thecollapse of Israel's coalition was "bad news" for the country'sdebt. He said Israel's debt rating outlook remained "negative"and stressed it was critical for Israel to return to a path offiscal consolidation.
After talks to save the coalition fell apart, Ben-Eliezerurged Labour lawmakers to reject the spending package of 269.9billion shekels (€57 billion) that included spending cuts ofnearly 2 percent from 2002.
Labour had wanted some funding earmarked for controversial Jewishsettlements situated on occupied Palestinian lands funnelled to Israel's poor, but critics accusedBen-Eliezer, Labour's leading hawk, of playing the settlementcard to court left-wing voters ahead of a party primary nextmonth. Polls show Ben-Eliezer, who recently expressed supportfor the budget, trailing two dovish challengers for leadershipof Labour.