JERUSALEM, Sept. 5 (Xinhua) -- Israeli Finance Minister Abraham Hirchson said on Tuesday that no more than 3 billion shekels (about 670 million U.S. dollars) would be added to the defense budget in 2007.

    The increased fund will be used to rehabilitate north Israel and compensate residents whose houses and businesses were damaged in the 34-day-long Israel-Hezbollah conflict, Hirchson told a press conference regarding the 2007 budget.

    He said that the conflict, which cost 13-14 billion shekels (about 292-315 million dollars), would impose a long-term impact on the Israeli economy, adding the treasury will freeze a planned increase to minimum wage in 2007 and current government stipends.

    The wage decision met with strong opposition by Defense Minister Amir Peretz, also leader of the Labor Party.

    On Monday, Peretz threatened to lead Labor to quit the coalition government, saying, "That is a red line as far as I'm concerned. It is the central achievement of the coalition agreement."

    Hirchson said that Prime Minister Ehud Olmert had accepted a treasury proposal to appoint a panel of experts from the treasury and defense establishment to determine the rest of defense establishment's budgetary demands as well as makeup of the defense budget.

    The Israel-Hezbollah fighting, which erupted on July 12 after Hezbollah guerrillas abducted two Israeli soldiers and killed eight others in a cross-border attack, ended on Aug. 14 under a UN resolution. Enditem