Mr Netanyahu wants big budget cuts

Talks between the Finance Minster Benjamin Netanyahu and the head of the Histadrut labour federation, Amir Peretz, broke down late on Tuesday night.

The strike, which started on Sunday, comes as Israeli's economy enters its third year of recession due to the uprising in response to the occupation of Palestinian territory.

The combination of reduced tax receipts and higher military spending have pushed the budget deficit to twice the target level.

An extended strike by Histadrut, which has about half a million members, would further deepen the financial crisis.

Netanyahu wants parliament to pass budget cuts of 11bn shekels (�1.5bn; $2.4bn) to be achieved by slashing jobs, cutting public sector wages by 8% and increasing the pension age.

Alternative budget rejected

The government is reportedly considering postponing the budget vote next Monday if Histadrut calls off the strike.

Mr Peretz, speaking on Israel Radio, presented an alternative four-point budget plan which includes a 5.5bn shekel bond to be levied on all workers, a crackdown on unpaid taxes and a wage freeze.

A Treasury minister rejected the proposals.

Histadrut members at state-owned companies and statutory authorities - like the Postal Service, Bezeq telecom and airports authority - are due to join the strike on Sunday.

Some garbage collectors and parking inspectors walked out on Tuesday, but teachers who were due to strike on Wednesday have delayed the action until next week.

Israeli diplomatic staff around the world also joined the strike on Tuesday, causing consulates to shut down.