Olmert cuts deal with rivals to stay in power

The Israeli Prime Minister Ehud Olmert cut a political deal with his Labour party allies yesterday that will keep him in power for up to three more months to pursue peace agreements with the Palestinians and Syria.

Mr Olmert, who is facing calls to quit over claims that he benefited from bribes, convinced Ehud Barak, the Defence minister and Labour leader, not to bring down the current coalition government. The deal means that Mr Olmert has bought himself more time in which to clear his name. He denies wrongdoing and has not been charged, but has said he will resign if he is indicted.

In exchange for Mr Barak's support, Mr Olmert promised to hold a primary leadership election within his own Kadima party before 25 September. The ballot is likely to oust Mr Olmert as leader.

Mr Olmert's popularity was dealt a severe blow when a US businessman testified in a corruption case against the Israeli leader. The American said he gave envelopes stuffed with hundreds of thousands of dollars in cash to Mr Olmert, in part to finance a lavish lifestyle which included a penchant for fancy hotels and cigars.

After the testimony, Mr Barak threatened to force new elections unless Mr Olmert resigned or agreed to hold Kadima party primaries. The compromise allows both men to save face. Mr Olmert can stay in office and keep his coalition intact, while Mr Barak can claim he is forcing Kadima to change its leader.

Kadima officials said Mr Olmert had not ruled out running in the primary, and hoped to clear his name after cross-examination of the businessman, Morris Talansky, which is due to take place on 17 July. But opinion polls show Mr Olmert is extremely unpopular – both within his party and among the Israeli public – and is unlikely to win.