Olmert's party faces "Titanic" moment over probe

By Adam Entous - Analysis

JERUSALEM (Reuters) - Israeli Prime Minister Ehud Olmert's colleagues are considering their options should he resign over a bribery scandal, political sources said on Friday.

Foreign Minister Tzipi Livni, Olmert's deputy in the centrist Kadima party, could take over as interim leader if Olmert quits -- as he says he will if prosecutors indict him.

But Olmert is one of the great survivors of Israeli politics. And a range of other scenarios offer opportunities and risks -- not just for Israelis but also for the Palestinians and U.S. officials struggling to secure a peace deal between them.

"Everybody is checking to see if they have a place on the lifeboat before the Titanic sinks," said a former adviser to Olmert, who spoke on condition of anonymity. "If the Titanic goes down, we don't want to go down with it."

Among those who might favor a handover to Livni is President George W. Bush, whose hopes for a deal on founding a Palestinian state before he leaves the White House in January would be dashed if Israel held an early parliamentary election.

Bush is to meet Olmert on Wednesday when he visits Israel to mark the 60th anniversary of the founding of the Jewish state.

Kadima, or "Forward" in Hebrew, was formed in 2005 by then prime minister Ariel Sharon, when he, Olmert, Livni and others quit the right-wing Likud and joined rebels from left-wing Labor. Olmert took over when a stroke left Sharon in a coma but sources say the party barely functions as cohesive unit.

To hold on to power, Olmert depends on rival parties within his fragile coalition, chief among them Ehud Barak's Labor.

A day after Olmert admitted taking cash from an American businessman at the centre of a police investigation into allegations of bribery, most Kadima ministers remained silent, a sign his standing was shaky, the political sources said.

If more incriminating evidence emerges about Olmert, the sources said, pressure would likely build within Kadima for him to resign. Even without further evidence, Olmert himself has pledged to resign if he is indicted -- though not before.

Political sources said Kadima and Labor leaders would hold private discussions over the weekend to decide how to proceed.

Olmert, who once described himself as "indestructible", has survived several past investigations. The former adviser said it would be wrong to write him off: "He's the best political survivor that the Israeli political system has ever produced".

HESITATION

While one political source described the mood within Kadima as bleak, he said there was a reluctance to speak out too soon -- he noted Livni's ill-fated public call last year for Olmert to quit after a scathing report on Israel's 2006 war in Lebanon.

Olmert simply ignored her, denting Livni's own standing.