Israel's parliament has passed the controversial 270bn shekel (�36bn; $60bn) 2003 budget in its last session before next year's elections.

In October the Labour party, objecting to budget funding for Jewish settlements in the West Bank and Gaza Strip, pulled out of the coalition government.

The dispute with Prime Minister Ariel Sharon's right-wing Likud party left him without a parliamentary majority and forced him to call a general election.

Mr Sharon called the budget a test of "national responsibility"

Mr Sharon warned on Monday that support for the budget would be "the real test of national responsibility for politicians from all parties".

Deep spending cuts were made to persuade international credit agencies maintain Israel's sovereign rating.

The new budget makes cuts to welfare and defence spending, but maintains funding for Jewish settlements in the occupied Palestinian territories.

Parliament voted 53-23 in favour with nine abstentions, mainly from the Labour Party.

Budget revision

Israel is in the grip of a recession brought on by the two-year-old Palestinian uprising and slump in the hi-tech industrial sector.

The budget has been criticised for offering little to stimulate the stagnant economy or help lower the country's 10% unemployment rate.

The government, which receives $3bn a year in funding from the US, has seen its revenues slump and defence costs have soared.

Israel said on Tuesday it hoped the US would quickly approve a request for $10bn in financial aid, including $4bn in military assistance and $6bn in loan guarantees.

Israel is not expected to meet its budget deficit target this year of 3.9% of gross domestic product or next year's 3% target.

A lower deficit might spur the central bank into cutting rates from 9.1%.

It projects 1% GDP growth in 2003.