Israel's Prime Minister Benjamin Netanyahu on Sunday convened a meeting with security and finance leaders to discuss cuts on the defense budget, which the military said would limit its ability to defend the country.

Finance Minister Yair Lapid, responsible for curbing an alarming deficit of nearly NIS 40 billion (about 11 billion U.S. dollars), is seeking to cut some NIS 4 billion (1.12 billion dollars) on the Defense Ministry's budget.

Lapid presented his plan at the meeting attended by Defense Minister Moshe Ya'alon, army chiefs and senior officials of the defense and finance ministries.

Ya'alon, army chief Benny Gantz and other top officers briefed the attendees on the security challenges facing Israel and the implications of slashing their budget.

Netanyahu, who backed an emergency plan presented by Lapid last week on trimming the deficit through tax hikes and other measures, hinted that the defense budget would have to give in.

However, defense officials warned that cuts on their budget would constitute a blow to the army's ability to deal with the many threats posed by an increasingly volatile Middle East.

For their part, the treasury's officials argue that the threats to Israel's security have decreased, citing a new hi-tech barrier built along the border with Egypt's Sinai and most Arab governments' preoccupation with their domestic issues.

The planned 2013-2014 budget, which is due for cabinet debate on Monday, is also expected to raise workers' income tax by 1.5 percent while increasing Value-Added Tax (VAT) from 17 percent to 18 percent. Endi

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