A political battle by Israel's military to beef up the defense budget in the face of unprecedented demands for greater social spending appears to be intensifying amid clashes along the border with Egypt that could reignite a front dormant since a historic 1979 peace treaty.

Eight Israelis were killed and 30 wounded in the attacks in the Sinai Peninsula Thursday and Friday, apparently by jihadists linked to al-Qaida.

The attacks, the bloodiest militant operations since the Hamas suicide bombings that ended five years ago, triggered retaliatory air and artillery strikes by Israel.

The bloodshed will almost certainly bolster military commanders in their demands for greater military funding.

They are already bracing for conflict with Lebanon's Iranian-backed Hezbollah, and possibly even Iran itself, as well as Hamas in the Gaza Strip, not to mention anticipating an explosion of trouble when the Palestinians declare statehood at the United Nations Sept. 21.

In the past, the army, long the most cherished institution in Israel, would most likely have got its way.

But Prime Minister Binyamin Netanyahu's right-wing government is faced with an unprecedented nationwide uprising for economic and social reforms that has jolted the body politic to the core.

Angry citizens from all walks of life staged massive protests and erected tent cities to voice demands for low-cost housing, jobs, healthcare, education and lower taxes.

To pay for that, cuts have to be made and the defense budget, the biggest single item of government expenditure, is squarely in the firing line.

The generals fought a rearguard action, warning that Israel faces so many dangers that now was not the time for defense cutbacks. But last week they agreed to freeze the current defense budget -- $14 billion, including $3 billion in U.S. military aid -- for a year.

That's unlikely to suffice. The media suggests the generals are using "scare tactics" by invoking the dangers that threaten the Jewish state.

"The Defense Ministry and the army have managed to terrify the public over the last 20 years," observed Yossi Melman, a security and intelligence specialist with the liberal Haaretz newspaper.

"They do it during times of quiet, and even more in times of war and crisis. Whenever anyone seeks to cut their budgets they cry bitterly, inflating real or imagined threats against Israel and warning that if even one shekel is removed, Israel's existence will be imperiled."

Melman insisted that Netanyahu, a hard-line hawk who has supported budget increases for the military, put his foot down and cut defense spending "because Israel is a country with an army, and not vice versa."

Over the years the military has pretty much had things its own way. The defense budget soared from $13.04 billion in 2006, when Israel fought a disastrous 34-day war with Hezbollah, to $15.3 billion this year.

The army blamed budget cuts for its poor performance in the 2006 war and in 2007 the government boosted the budget to $19.8 billion.

That would be spread over 10 years, with $13.04 billion coming from the state budget and $6.8 billion from additional U.S. aid.

Before Thursday's bloodletting, the generals had agreed to a one-year freeze on the military budget at the current level, which includes $3 billion a year in U.S. military aid.

The military's five-year plan, due to start in 2012, would be put on ice, meaning no funds for a host of major weapons platforms and severe cutbacks in orders for the high-tech defense industry.

These include such items as 40 Lockheed Martin F-35 stealth fighters, new missile warships and other big-ticket programs, together worth tens of billions of dollars, to maintain Israel's long-held military supremacy in the region.

The development and procurement of several air-defense systems to counter the gamut of missiles threats is another funding black hole.

It remains to be seen whether this week's attacks, and the distinct prospect of worse to come as the security vacuum in Sinai worsens following the February fall of Egyptian President Hosni Mubarak, will influence the heated debate over the military budget.

But Haaretz warned Defense Minister Ehud Barak to stop "constantly frightening the public with warnings about security risks.

"It's clear it will be impossible to deal with social injustices unless the Defense Ministry and the military agree to cut their budget," it said.

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