Jerusalem's status is the most difficult issue in attempts to end the Arab-Israeli conflict. The victory of Mr Olmert, who vowed to block any concessions, could impede attempts to reach an agreement on sharing the city. When its status is discussed it will be a right-winger, who believes in aggressive Jewish settlement throughout the city, who will speak for the municipality.
'I am not sorry for a minute that I ran,' said Mr Kollek, noting that he had not found a successor.
Although Mr Kollek and Mr Olmert both believe in maintaining a united Jerusalem under Israeli sovereignty, Mr Kollek's policies have been in line with the ruling Labour Party, which supports the peace process.
Support for Mr Olmert, however, was not being seen as a vote against the peace deal, but rather a sign that Jews had lost confidence in Mr Kollek, 83, who had said several times he would stand down.
Mr Kollek was damaged by the decision of an ultra-orthodox candidate, Meir Porush, to withdraw from the race, urging the large ultra-orthodox community to vote for Mr Olmert.
Last night Mr Olmert tried to reassure the city that he would not tinker with its delicate balance: 'Jerusalem will not become ultraorthodox. It will be a Jewish city where Jews, religious and secular, live as neighbours.'
The Prime Minister, Yitzhak Rabin, said: 'Jerusalem and the people of Israel lost the great builder of Jerusalem in the modern age.' He had urged residents to vote for Mr Kollek and candidates aligned with Labour as a sign of support for peace. 'Of course it will have a negative echo in Israel's peace efforts,' he conceded, adding that local election results nationally gave no clear message on the peace talks.
Hopes in the Kollek camp that a larger than usual Arab turnout would assist Mr Kollek were dashed - only small numbers voted. Palestinians have traditionally boycotted elections on the ground that they confer legitimacy on the occupation of east Jerusalem.
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