The budget proposals have sparked protests

Israel's parliament has backed a controversial economic package aimed at reducing the country's vast budget deficit and alleviating a punishing recession.

The vote to cut 10bn shekels ($2.2bn; �1.4bn) took hours as legislators worked through thousands of opposition amendments.

In the end, a walkout by opposition members of the 120-seat Knesset, or parliament, meant the bill was passed 50-one.

A domestic slowdown and a surge in defence costs since the start of the Palestinian uprising nearly three years ago have also taken their toll on the economy.

The finance ministry's austerity proposals, including a cut in pension payouts and an increase in contributions, are the key to freeing up $9bn in loan guarantees the US has offered Israel.

Up in arms

But the cuts have also sparked one of Israel's biggest ever public protests.

Tens of thousands of angry Israelis marched on the Finance Ministry earlier this week, threatening a general strike if the government went ahead with plans to cut pension benefits.

The protestors were addressed by a series of speakers who heaped criticism on Finance Minister Benjamin Netanyahu.

And earlier in May, the country was practically brought to a standstill by striking public sector workers, although the Histadrut labour federation later reached a compromise with the ministry.

But the 10bn shekels slashed from the public sector budget - which, as Mr Netanyahu pointed out, comprises 55% of gross domestic product - may not be enough.