Other defections are expected after Mr Netanyahu's humiliating parliamentary defeat on Monday night. During the session the Israeli parliament, the Knesset, voted for early elections and rejected the tough terms set by the government for continuing the Wye peace accord with the Palestinians.
The Likud leader is being assailed from both right and left in his seven- party coalition, by those who will never forgive him for signing the Wye deal in October with the Palestinian leader, Yasser Arafat, and by those who condemn him for halting it before the ink was dry.
Mr Meridor, who resigned as Mr Netanyahu's finance minister 18 months ago, told reporters yesterday: "The country is in a serious crisis, diplomatically, economically, socially, morally and, most important, from the point of view of leadership."
The 51-year-old lawyer entered Likud politics 20 years ago as a protege of the party's founding father, Menachem Begin.
He insisted that Mr Netanyahu had to be replaced but saw no chance of unseating him within the Likud.
Mr Meridor is expected to join forces with General Amnon Shahak, who retired earlier this year as Israel's chief of staff.
They will decide nearer polling day which of them has the better chance of winning the premiership. Although he has not yet announced his programme, General Shahak is leading the field in early surveys of public opinion.
Two members of Mr Netanyahu's Cabinet - the dovish Defence Minister, Yitzhak Mordechai, and the hawkish Communications Minister, Limor Livnat - are hinting that they will try to topple the Prime Minister from within the Likud. Uzi Landau, a hardline senior backbencher, is preparing to join them.
Mr Netanyahu's predecessor, Yitzhak Shamir, joined the attack on the Prime Minister, accusing him yesterday of destroying the party.
At the same time Menachem Begin's son, Benny, is planning to leave the Likud and launch a party to challenge Mr Netanyahu from the right.
"There is an urgent need," the former science minister explained, "for a political body that would represent those many people who were the most enthusiastic and loyal supporters of Mr Netanyahu in the last elections and [who] feel today that they have been totally betrayed."
In radio and television interviews a chastened Mr Netanyahu said that he would put his faith in the "silent majority" who had elected him two years ago.
"I have no doubt that, when we start the race, the 150,000 to 200,000 Likud voters will give me massive support," he said. "They know very well that only I, at the head of the Likud, can lead the country."
Polls published yesterday suggest, however, that public confidence in Mr Netanyahu is slipping. In a straight fight, the Labour opposition leader, Ehud Barak, leads Mr Netanyahu by 44 per cent to 40, while Mr Shahak enjoys a 13-point advantage (49-36). Apart from the crisis over the peace process, the Likud's working-class voters are angry about rising inflation, running at an annual rate of 9 per cent, a shrinking jobs market and under-funded social services.
Israeli commentators are almost united in dismissing Mr Netanyahu's chances of victory. "Last night he left the Knesset beaten, humiliated, disgraced, friendless, without allies, with no one having a good word to say about him," the Maariv tabloid newspaper said yesterday.
"People who only a few weeks ago described him as unbeatable speak of him today as a political corpse." The media were reluctant, however, to write his political obituary at such an early stage of a contest that may stretch into the spring.
Mr Netanyahu is a resourceful, aggressive campaigner who proved his mettle against the odds during the last election. The freeze on the peace process caused by the election is drawing bitter protests from the Palestinians, who call the political turmoil an internal Israeli affair and insist that Israel is still bound to the Wye accord, just as it is to other pre-existing international agreements.
"It's really unfortunate that the only thing that Mr Netanyahu has decided to stop is the peace process with us," said the chief Palestinian negotiator, Saeb Erekat. "I think this is a very grave development."
The elections are likely to take place by the end of April.
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