By Ari Rabinovitch
TEL AVIV (Reuters) - Tens of thousands of Israelis marched for lower living costs on Saturday in what protest leaders called "a moment of truth" for a movement that has mounted pressure on Prime Minister Benjamin Netanyahu to take on sweeping economic reform.
"An entire generation wants a future," read one banner as demonstrators flooded the streets of Tel Aviv, Haifa and Jerusalem, shouting "the people demand social justice."
"Tonight is the pinnacle moment of a historic protest," Amir Rochman, 30, an activist from Israel's Green Party said.
The grassroots movement has swollen since July from a cluster of student tent-squatters into a diffuse, countrywide mobilisation of Israel's middle class.
"Tonight society will divide into an old type of Israeli who just accepts the way things are and a new type who will join us in pushing for change," Itzik Shmuli, head of the National Student Union and one of the protest's leaders said.
The popular movement has catapulted the economy onto Israel's political agenda upstaging a diplomatic face-off with the Palestinians for U.N. recognition of statehood and posing the greatest challenge yet to Netanyahu, halfway into his term.
Although Israel enjoys a low unemployment rate and a growing economy, business cartels and wage disparities have kept many from feeling the benefit. Many protesters come from the middle class which bares a heavy tax burden and sustains the conscript military.
The weekly protests prompted Netanyahu -- a champion of free market reform -- to set up a committee now exploring a broad revamp of economic policies. The government has also announced housing and consumer market reforms.
But Netanyahu has warned he would not be able to satisfy all the protesters' demands, ranging from tax cuts, to expansion of free education and bigger government housing budgets.
"Priorities must be set, one thing comes at the expense of another," Roni Sofer, a spokesman for Netanyahu, told Israel Radio on Saturday, adding that the government would not break its budget.
Netanyahu's governing coalition faces no immediate threat, but the protests have underscored the potential electoral impact of a middle class rallying under a banner of "social justice" and rewriting a political agenda long dominated by security issues.
(Writing by Maayan Lubell; Editing by Rosalind Russell)