Lands spat pits Netanyahu against coalition allies

JERUSALEM (Reuters) - Israeli Prime Minister Benjamin Netanyahu faced his first coalition crisis Wednesday over a privatization bill that he had championed but was forced to withdraw due to a lack of support in parliament.

The legislation, which would have put swathes of state-owned land up for sale, met opposition from lawmakers in two parties allied to Netanyahu, as well as within his own rightist Likud. Several of those demurring sat out the ratification session.

Bereft of a majority in the 120-seat Knesset, Netanyahu withdrew the bill and threatened to fire cabinet ministers and deputy ministers who did not back the measure in an as-yet unscheduled return vote. Netanyahu's office later said he had obtained pledges of support from the heads of partner factions.

The infighting was a new challenge to Netanyahu, who took power in March at the head of a broad-based coalition which he said would help Israel address the diplomatic deadlock with the Palestinians and the nuclear aspirations of arch-foe Iran.

But Netanyahu's refusal to halt construction of Jewish settlements on occupied West Bank land has prompted a rare rift with the administration of U.S. President Barack Obama.

Raviv Drucker, political analyst for Channel Ten television, said the crisis over the "Israel Lands Authority (ILA) Law" was reversible, but added: "It's impossible to think of a greater embarrassment for Netanyahu, because this is his baby."

A former finance minister, Netanyahu won plaudits for his free-market reforms and argues that sweeping privatization is crucial for keeping Israel above the global financial crisis. The ILA owns 93 percent of land in Israel.

Netanyahu's economic views are not shared by more social welfare-minded lawmakers in the center-left Labor party, a key Likud ally. Members of the religious-nationalist Jewish Home party, another coalition partner opposed to the bill, said national turf should remain the Jewish state's public trust.

It was not clear when the bill could be ratified. A Knesset spokesman said that regulations barred a new vote before next Wednesday, when parliament disbands for summer recess, but also required that the vote take place within three weeks thereafter.

Netanyahu could order a special session during the recess, the spokesman said -- something that would likely help the chances of ratification, as opposition lawmakers may have less incentive to attend during their vacations.

(Additional reporting by Steven Scheer)

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