This year, as always, the big battle is between the treasury and the Defense Ministry. In a normal year, the battle is over the size of the addition to the budget of the Israel Defense Forces. This year, as a result of the social protest movement, the arm wrestling contest is over the size of the reduction.

Defense Minister Ehud Barak is doing everything possible to prevent a deep cut, so he has proposed increasing the state budget by NIS 50 billion. Of course his proposal won't be accepted, but it serves populistic purposes. Finance Minister Yuval Steinitz, in contrast, is demonstrating responsibility, saying: We won't increase the overall budget but we will reduce the amount allocated to security so we'll have money to give to the social protest.

But is it truly possible to reduce the military budget significantly for an extended period of time, given the current policy of the Netanyahu government? After all, this government has led us into unprecedented weakness and international isolation. Relations with Turkey are at a worrying nadir, with Ankara even threatening to send warships to protect the next flotilla to the Gaza Strip. Prime Minister Recep Tayyip Erdogan is continually stepping up his rhetoric, and yesterday he met with Egypt's top officials in order to forge a strategic, military-economic alliance that is aimed in part against Israel.

Our relations with Egypt are at a historic low. The ambassador was forced to flee to Israel, and there's no telling when he will return to Cairo. Israeli businesspeople are cutting the scope of their dealings with Egypt and are arranging to meet with their counterparts from that country in Europe only. A big anti-Israel demonstration is set to take place in Jordan on Thursday night. The aim is to force their way into the embassy and drive out the ambassador. They want in on the hate-fest, too.

One week from today, on September 20, the United Nations is expected to hear a request to recognize an independent Palestinian state; there is a clear and present danger of hostile acts, perhaps even a third intifada.

In the light of these circumstances, all Israeli intelligence agencies - Mossad, Military Intelligence and the Shin Bet - claim that renewing the peace process with the Palestinians could reduce the pressure on Israel, as well as the incentive for Egypt and Turkey to tangle with Israel. But the Netanyahu government is loath to enter into any sort of negotiation, even though the top two Palestinian leaders today, Palestinian Authority President Mahmoud Abbas and Prime Minister Salam Fayyad, are the most moderate individuals one could wish for.

If that's the situation, how is it possible to make a meaningful cut to the defense budget?

Steinitz was recently asked about the possibility of cutting state allocations to two preferred communities, the settlers and the ultra-Orthodox. He declared he had no intention of touching these generous budgets. Both of these groups are natural partners of Likud that Steinitz will not allow to be hurt, because the stability of the government and his place at the cabinet table are more important to him than any social protest.

Knesset Finance Committee chairman MK Moshe Gafni (United Torah Judaism ) recently said that the Netanyahu government has given the Haredim more than any of its predecessors. Indeed, the state lays out NIS 1 billion a year on yeshivas, so that a young Haredi man not only doesn't work, but also receives NIS 2,500 a month from his yeshiva and another NIS 900 directly from the state. The state also gives him a subsidized apartment, a discount on municipal taxes and near-free education. Even if his wife works outside the home, the family pays no income tax on account of the large number of children. In other words, they live off the non-Haredi taxpayer and, from Steinitz's perspective, this is just and right.

Settlers are another preferred sector, and have been for 34 years - since the election upset of 1977, when Likud came to power for the first time. To understand this, it's enough to see the tunnels and wide roads in the West Bank, that top even Highway 1 (linking Tel Aviv and Jerusalem ). It's enough to see the enormous amounts of money spent on turning rocky hills into small, expensive communities, and the cost of guarding each one. Meir Cohen, the mayor of Dimona, recently said that the billions spent in the territories came at the expense of the development towns - and he is right wing.

Netanyahu and Steinitz must tell us the truth - if they are unwilling to enter into negotiations with the Palestinians, and would rather continue to live by the sword; and if they are also unwilling to cut funding to Haredim and settlers. If so, they should say explicitly that they are incapable of addressing the social protest. There simply aren't enough resources.