Amid an intense political battle over Israel's defense budget, the navy scrapped plans to buy two next-generation missile ships and the air force is thinking of buying second-hand U.S. Air Force F-15s rather than more expensive new jets.

Indeed, the procurement plans for Israel's armed forces have "come to a complete halt," The Jerusalem Post reported, as the government haggles over cuts to the defense budget.

The chief protagonists in the escalating battle are Finance Minister Yuval Steinitz and Defense Minister Ehud Barak.

Steinitz is pushing hard for greater transparency and accountability by the Defense Ministry, which has a free hand to a large extent, certainly more than other ministries.

Barak, a former military chief of staff and prime minister, adamantly refuses to surrender any of his ministry's powers and argues that the military cannot be pinned down on spending if it's to defend the Jewish state against its foes.

"I'm stubborn," Steinitz told the liberal Haaretz daily. "I don't intend to give up. We're going to pursue justice with no mercy.

"I've declared war on Ehud Barak on the issue of transparency and control and it will happen -- if not now, then later through Knesset legislation."

The pressure for defense cutbacks stems largely from unprecedented protests across Israel for greater social spending to counter rising prices, housing shortages and unemployment amid a global recession.

Israeli Prime Minister Binyamin Netanyahu's right-wing coalition government was forced to agree to improve conditions swiftly.

Since the Defense Ministry gets the lion's share of government funding, it was tapped to initiate major cutbacks, despite growing security threats ranging from Iran's alleged drive for nuclear weapons to the upheavals of the Arab Spring and a growing missile threat.

The cutbacks hit the Defense Ministry five-year development and procurement plan, known as the Hamalish Plan, which was scheduled to begin in 2012.

This is based on the premise there's a growing possibility Israel will be caught in a multi-front war in the near future. Analysts say that's likely to mean an unprecedented barrage of missiles and rockets on Israeli cities that could be sustained for two months.

Critics say the defense budget has been growing since the 2006 war with Lebanon's Hezbollah in which serious shortcomings in Israel's military were exposed. Barak claims defense spending has actually been shrinking, while the military has had to develop defense systems to counter the missile threat.

"To convince us that it's impossible to make cuts in the fat and inflated military budget, he's using the familiar method of scaring people," said one commentary in Haaretz.

"Barak is simply pulling the wool over our eyes. He doesn't tell us that … five years ago the budget stood at $12.4 billion but in 2012 will reach $14.8 billion, a 22 percent leap."

The United States, which provides Israel with $3 billion a year in military aids, provided $205 million in extra funds for Iron Dome in the spring. The Defense Ministry said Sunday Washington will cough up another $235 million for more batteries of Iron Dome, developed by Rafael Advanced Defense Systems.

But other military systems are being dropped, like the two missile warships the navy wanted to expand its surface fleet. The plan was to buy designs from Germany's Blohm+Voss and build the vessels in Israel for $500 million.

That's out, and now the plan's to order two new smaller Sa'ar 4.5-class missile corvettes built in Israel, financing the deal by retiring two older Sa'ar 4 vessels.

That's a major setback for plans to enlarge the navy as its operational zones expand into the Red Sea and the Arabian Sea off Iran.

In 2010, the air force, which will bear the brunt of any conflict with Iran, ordered 20 Lockheed Martin F-35 stealth fighters worth $2.75 billion to maintain its long-held supremacy in the air. But delays in the F-35 program mean Israel may not get the jet -- the first of 75 it plans to buy -- until after 2017.

It has mulled buying upgraded Boeing F-15 Eagles and Lockheed F-16 Falcons as a stopgap.

But even that's likely to be too expensive in the current economic climate. So now the air force is looking at a cheaper alternative.