Prime Minister Menachem Begin's government agreed today to compromise on antiinflationary budget cuts after months of wrangling but failed to end the malaise threatening the beleaguered administration.
Although Finance Minister Yigael Hurvitz expressed formal public satisfaction with the cuts, which are to be hammered out Monday by a special ministerial committee, insiders insisted that he still was considering quitting.
Hurvitz, who pledged to slash $400 million from the current $13.6 million budget, was reportedly depressed at his failure to win Cabinet support for more than two-thirds of the cuts he deemed necessary to stem Israel's runaway inflation.
Inflation has increased 130 percent annually and is running at close to an annual rate of 200 percent based on the price indexes of the last two months.
If hurvitz and two fellow members of his party withdrew their support for Begin's coalition government in the parliament, Begin's majority would be in peril, according to political analysts.
Education Minister Zevulun Hammer said the budge compromise "shows how thin the fabric of this government is" and predicted it would fall before its mandate expires in October 1981.
The government also has shown recent signs of wanting to push ahead with its controversial settlement policy on the Israeli-occupied West Bank and long-announced plans to move the prime minister's office and the Cabinet conference hall to predominatly Arab East Jerusalem.
In the past week, Israeli newspapers have published articles and photographs of buildings under consideration for office space in East Jerusalem, which was annexed after the 1967 war. The recent flurry of interest in the transfer, which government officials vaguely say is likely in the next few months, apparently stems from Begin's determination to create a presence in East Jerusalem that any successor government would have trouble undoing.
Hurvitz told reporters after the regular Sunday Cabinet session that "if I quit, I would pave the way for [opposition Labor Party leader Shimon Peres and a Palestinian state.]
Peres and other opposition leaders have called on the government to stop further Jewish settlements in the West Bank as a means of fighting inflation.
Hurvitz and other cabinet ministers have charged that if the Labor Party is returned to power, it will strike a deal with the Palestinians.
Some Labor Party leaders have stated that they favor some kind of formula that would return the West Bank to Jordan, which administered the territories between 1948 and 1967.
Peres specifically has opposed the establishment of an independent Palestinian state in the West Bank.
Cabinet spokesman Arie Naor said the government had agreed to more budget cuts of between $320 million and $350 million, although those figures do not tally with others quoting higher amounts.
The biggest budget battle took place Wednesday night in a nine-hour session in which the military successfully rebuffed Hurvitz's efforts to slash the armed forces budget by $300 million. They agreed to a $140 million reduction and thereby placed greater pressure on the civilian ministries to trim their programs.
Meanwhile, an Israeli civilian was slightly wounded today when a bomb went off under his car in occupied Gaza town, a military spokesman said in Tel Aviv. Several Arabs were detained for interrogation, the spokesman added.