In total, the cabinet decided, 48,000 foreigners will be allowed to work here legally this year, down from 61,000 last year. Of these, 20,000 will work in construction - a 33 percent drop from last year's quota of 30,000 - and 26,000 will work in agriculture, down 7 percent from 28,000 last year. The remaining permits are for industrial companies, restaurants and hotels.

"This is a death blow to the construction industry," said Yehuda Segev, director-general of the Contractors Association, in response. "Once again, we see that someone is looking out for agriculture, and the entire cut was imposed on construction."

Both Agriculture Minister Yisrael Katz and Housing Minister Effi Eitam had lobbied for keeping the number of permits at last year's level, thereby reversing the April, 2003 cabinet decision that called for reducing the quota to 48,000 this year. However, this proposal was rejected, thanks largely to a vigorous last-minute campaign by Finance Minister Benjamin Netanyahu.

With regard to the distribution of the quotas, however, Katz won a significant victory: The April 2003 decision had allocated 23,000 permits for construction, 3,000 for industry and hotels and only 22,000 for agriculture.

The Finance Ministry had proposed reducing the quota for agriculture even further, to 19,000, but Katz also persuaded the cabinet to defeat this proposal. Katz had behind-the-scenes backing from Prime Minister Ariel Sharon, but Sharon did not attend yesterday's session, apparently because his own ranch employs foreign workers. Instead, Industry, Trade and Employment Minister Ehud Olmert chaired the meeting, and it was Olmert who decided how the permits would be divvied up between agriculture and construction.

The cabinet also decided to set up a special ministerial committee on foreign workers for agriculture, to be chaired by Olmert. Katz, who will sit on this committee, said he hopes to persuade it to raise the quota back to 28,000.

Segev charged that the government was behaving irresponsibly. "It invests NIS 400 million in a police force to deport foreign workers in an ugly fashion, but it doesn't invest a cent in training Israeli construction workers ... [and] it is not implementing a law that it itself sponsored to provide incentives for contractors to employ Israeli workers," he said.