Mr Sharon fired the first shots in what promises to be a bitterly fought contest by declaring last night that the man who served as his finance minister until three weeks ago "was not fit to lead a government".
He said Mr Netanyahu who was Prime Minister from 1996 to 1999 had "run away from his responsibilities" by resigning in protest over the Gaza disengagement less than a week before he was due to present his budget, after having voted for the withdrawal.
The latest polls show that Mr Netanyahu, who is going all-out to secure the hard-right vote in the party, is the front-runner among party members, but he trails Mr Sharon in popularity among the electorate at large.
As Israel Radio reported that Mr Netanyahu was likely to announce his candidacy today, Mr Sharon said in an interview on Israel's Channel 10: "Benjamin Netanyahu is a stressful and stressed person, who panics and loses his senses and a person like this cannot lead a state." He added that Mr Netanyahu was "not fit to lead a government certainly not a government like Israel's. Here one needs emotional calm."
Mr Sharon acknowledged that "not all" West Bank settlements would remain in any final peace deal with the Palestinians. This will be seen as no more than an obvious corollary of his insistence also repeated yesterday that the biggest settlement blocks would remain in Israel.
He has continued to declare that any further settlement withdrawals would only follow a return to the internationally agreed "road map" to peace, which he insists will only happen when the Palestinian leadership disarms and disables Hamas.
The crisis posed for Mr Sharon by Mr Netanyahu's candidacy has prompted some aides to start discussing the possibility that he might form a new party of the "centre" with significant elements of Labour, now in his coalition government .
But the relative ferocity of his remarks suggest that Mr Sharon has by no means abandoned hopes of defeating Mr Netanyahu in Likud leadership primaries, not least by emphasising the former's lack of broad electoral appeal compared to his own.
* Palestinian militants told an Egyptian envoy seeking to calm rising tensions in the region that they were committed to the truce with Israel. Omar Suleiman, Egypt's intelligence chief, was in Gaza to bolster the ceasefire and mediate an agreement on Gaza's borders that would allow Gazans to come and go freely for the first time in nearly 40 years.
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