INSTANT VIEW: Olmert coalition ally demands he step aside

(Reuters) - Following are comments from analysts after Israeli Defense Minister Ehud Barak called on Wednesday for Prime Minister Ehud Olmert to step aside or face the collapse of his coalition and an early election, after damaging allegations of corruption. Olmert denies any wrongdoing.

DANNY YATOM, LABOUR LAWMAKER

"I'm happy that Ehud Barak finally revealed the truth ...

"I think that the bottom line of Ehud Barak's message should have been more unequivocal, that if this doesn't happen within a certain period of time ... that the Labor Party would pull out of the government. This didn't happen. I didn't hear it."

YOSSI SHEIN, HEAD OF DIPLOMACY DEPARTMENT AT TEL AVIV

UNIVERSITY

"This will accelerate Olmert's departure. It's impossible for him to govern. We are in a political and institutional crisis which may bring down Olmert as the prime minister and/or bring new elections.

"Barak's statement adds to the avalanche that has reduced the chances of Olmert remaining as prime minister, even though the legal procedure has not taken its course. The public perception and the pressures will be insurmountable."

JONATHAN KATZ, ECONOMIST, HSBC, TEL AVIV

"It's not a good move for Barak. Bibi (opposition leader Benjamin Netanyahu) is more popular. It puts Bibi in the driver's seat and Barak will be in opposition.

"It's a lot of noise but I can't see him acting upon it. I can't see Labour winning an election. The country has moved to the right. People remember Barak from Camp David. He has a bad name.

"If elections are held in early 2009 it will be positive for the economy from the fiscal aspect because if the 2009 budget is not approved (on time), and if there is no government, then the law says you spend using last year's budget with no additions possible. It forces restrictive fiscal policy.

"We are not in position like 20 years ago when elections meant subsidies and tax cuts on cars and the deficit would surge.

RAPHAEL ISRAELI, PROFESSOR OF ISLAMIC AND MIDDLE EASTERN

HISTORY AT HEBREW UNIVERSITY, JERUSALEM

"In view of the choices gives to Olmert by Barak, Olmert will have to go in the end in any case.

"But in my mind, Olmert is so glued to his position that I don't think we can expect him to resign or let his Kadima party choose someone to replace him as leader, especially since he hates his likely heir apparent -- Foreign Minister Tzipi Livni.

"The choice is either for Kadima to stay with another head of party -- which would mean them quickly holding primaries -- or if Olmert does not resign, Barak will quit the government, Kadima will lose its majority, and they will have to declare new elections.

"Olmert will claim that as long as he is not indicted, he does not have to resign. He will stay on as head of a transitional government to gain time ahead of new elections, which polls show Likud, led by Netanyahu, is likely to win."