Israel's economy on the turn, says Netanyahu

The $51bn austerity budget, passed by a vote of 58 to 46, is aimed at restoring the Israeli economy to growth.

Three years of Palestinian-Israeli violence and the global economic downturn are blamed for the slump.

Since 1 January, the government has been operating on an emergency budget based on 2003 spending.

Finance Minister Binyamin Netanyahu proposed hefty cuts in spending on welfare, health and education as well as defence.

Protests

His proposals - particularly over pensions reform - sparked protests and widespread industrial action.

Approval of the budget was delayed by opposition parties' objections to the cuts, and coalition partners' demands for last minute additions.

Mr Netanyahu said after the vote that the Israeli economy was on the turn.

"The approval of the budget is in effect a perfect message," he said.

"We have completed the reform in the pensions fund, we continue to reduce taxes and we are opening up monopolies to competition.

"Our most important mission this year is to increase growth."