Olmert salvages Israel coalition in deal with Barak

By Dan Williams

JERUSALEM (Reuters) - Prime Minister Ehud Olmert averted a split in Israel's restive coalition on Wednesday by striking a deal with his biggest partner, the Labour party, that stopped it backing a bill to dissolve parliament.

Labour's leader, Defence Minister Ehud Barak, agreed not to support the right-wing opposition's proposed legislation after Olmert pledged to hold an internal vote in his Kadima party that could remove him as its head by September 25, both sides said.

"The real meaning of this (agreement) is that the state of Israel has been extricated from its daily preoccupation with holding new national elections," Kadima negotiator Tzachi Hanegbi told Israel Radio.

"Barak did well to recognize there's a red line."

Cracks appeared in the coalition last month with the launch of a police investigation into more than $150,000 that Olmert received from an American financier while in previous government posts. Barak called on the prime minister to step aside.

Olmert, who denies any wrongdoing but has pledged to resign if indicted, had threatened to fire Labour ministers should their faction join forces with opposition leader Benjamin Netanyahu to dissolve parliament and trigger an early election.

Ratification of the bill would have undermined the government at a time when Olmert is trying to meet a U.S. deadline for a peace accord with the Palestinians, pursue Turkish-mediated talks with Syria, assemble a prisoner swap with Lebanese Hezbollah and monitor Iran's nuclear program.

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