According to the National Insurance Institute report, some 277,000 families lived below the poverty line in 1998, up from 270,000 the previous year. Yishai said the figure represents 1.2 million people, among them 440,000 children. Figures for the first time include statistics on the self-employed and residents of eastern Jerusalem.

Barak's critics have accused him of pursuing foreign policy to distance himself from what they say is his failure to keep domestic promises to fight poverty and unemployment.

At least one government minister rejected such criticism, however.

Ran Cohen, trade and industry minister, called the latest figures a "social catastrophe," but said the core of the problem could be attributed to the policies of the previous Likud-led government.

"It is a black stain on all of us," Cohen said. He told Israel Radio that because the government of former Prime Minister Benjamin Netanyahu wasted "huge sums of money on Jewish settlements, the fervently Orthodox and all sorts of corruption, this is the result — that people are living below the poverty line in Israel.

"Enough of abusing the peace process in order to solve the social problem. The social problem must be solved on its own."