Olmert coalition at risk in Israel parliament vote

By Dan Williams

JERUSALEM (Reuters) - Israeli Prime Minister Ehud Olmert, beset by a corruption scandal and Gaza violence, faces a new battle on Wednesday in a parliamentary vote that could split his government.

The Labour party of Defence Minister Ehud Barak, Olmert's junior coalition partner, has pledged to support an opposition bill to dissolve the Knesset and hold early elections in protest at a police investigation into the prime minister's finances.

Short of Labour's support, Olmert's Kadima party is unlikely to muster enough votes to block the legislation. Subsequent ratification readings could be held by the end of parliament's summer session in late July, spelling the government's fall.

The crisis comes as Olmert tries to meet a U.S.-set deadline for a peace accord with the Palestinians, pursues Turkish-mediated talks with Syria, puts together a prisoner swap with Lebanese Hezbollah and monitors Iran's nuclear program.

Lawmakers said that Olmert and Barak, both of whom trail hawkish ex-Prime Minister Benjamin Netanyahu in opinion polls, were trying to find a way for Labour to back off the bill.

"I think that, ultimately, everyone understands we need to preserve stability," said Yoel Hasson of Kadima.

According to Israel's Channel One television, Barak offered to withdraw his support for dissolving parliament if Olmert agreed to allow his rivals for the Kadima leadership to challenge him in a party vote as early as July.

Since Israeli police launched an investigation last month into more than $150,000 in cash Olmert received from a New York financier, several senior Kadima members have proposed themselves as candidates to replace the prime minister. But the centrist party has not set a date for an internal election.

Olmert, who has denied wrongdoing in the funding case but said he would resign if indicted, this week threatened to fire Labour over Wednesday's bill. But that would deprive him of a majority in parliament, making snap elections a near certainty.

Olmert's spokesman did not return calls for comment on any 11th-hour talks with Labour.

Israel's Channel Two television said centre-left Labour was negotiating with another coalition member, the Orthodox Jewish party Shas, on a possible pact to bring down Kadima together.

Political crises in Israel have, in the past, been deferred to allow the national leadership to deal with major developments in matters of war or peace.

On Tuesday, militants in the Gaza Strip fired several rockets into Israel, breaching a five-day-old truce in the territory in what they called retaliation for the killing of one of their commanders in the occupied West Bank.

"What should be guiding us, and Ehud Barak, is our national responsibility," said Yoram Marciano, a Labour lawmaker who has rebelled at the party's decision to back Wednesday's bill.

"This is a crisis that nobody wants," he said. "And I think the people don't want early elections either."