Netanyahu maintains edge in Israel election race

By Jeffrey Heller

JERUSALEM (Reuters) - Israel's election race is back in full swing following the Gaza war and front-runner Benjamin Netanyahu has moved quickly to deflect allegations his victory could mean conflict with new U.S. President Barack Obama.

Claiming some of the middle ground in Israel occupied by the ruling Kadima party, Netanyahu told Middle East envoy Tony Blair that a government headed by his right-wing Likud party would not build new Jewish settlements, though would expand existing ones.

"Like all the governments there have been until now, I will have to meet the needs of natural growth in the population. I will not be able to choke the settlements," Netanyahu said, according to a spokesman for the Likud chief on Monday.

While such policy is opposed internationally and condemned by Palestinians seeking a state in the West Bank, it nonetheless puts Netanyahu broadly in line with the Kadima-led government and the party's prime ministerial candidate in the February 10 election, Foreign Minister Tzipi Livni.

Speaking to reporters on Sunday, Livni suggested a Netanyahu-led administration would set Israel on a collision course with Obama, who has pledged swift efforts to try to achieve Palestinian statehood and a wide Israeli-Arab peace.

Netanyahu has said peace talks, which Washington had hoped would achieve a framework peace deal in 2008, should focus on shoring up the Palestinian economy rather than on territorial issues that have stymied U.S. mediation so far.

"Israel and the United States could butt heads. It depends who's (in charge) here," Livni said in remarks widely seen as a swipe at Netanyahu, whose tenure as Israeli leader from 1996 to 1999 was marked by friction with the Clinton White House.

She followed up in a radio interview on Monday, saying: "Netanyahu has already been prime minister, and he failed."

Likud campaign billboards paint a different picture -- of a confident-looking Netanyahu and an accompanying slogan: "Strong on security, strong on the economy."

LIKUD LEADS

With the vote now two weeks away on Tuesday, polls show Likud firmly in the lead after Israel's Gaza offensive, trailed by Kadima and with third-place Labor, led by Defense Minister Ehud Barak, gaining support as a result of his role in the war.

The surveys give Likud some 29 seats in the 120-member parliament compared with about 25 for Kadima. Such a margin would leave Netanyahu well-placed to form a coalition government that could include partnerships with Kadima or Labor, as well as smaller religious and minority-interest groups.

The 22-day Gaza offensive was widely supported by Israelis, despite an international outcry over a Palestinian death toll that medical officials put at 1,300, including 700 civilians.

Israel said 10 of its soldiers and three civilians were killed during the offensive it launched in the Hamas-ruled enclave with the declared aim of halting cross-border rockets.

If the opinion polls are correct, Livni made few inroads among Israeli voters as a result of the Gaza war.