Sharon hits out at 'libel' after Likud slumps in Israeli poll

Ariel Sharon, the Israeli Prime Minister, hit back angrily yesterday over reports that he was under police investigation for receiving $1.5m (£930,000) from a businessman based in South Africa.

The scandal is likely further to endanger his chances in the general election on 28 January. Mr Sharon's once comfortable lead in opinion polls has been dwindling since allegations surfaced of vote-buying and underworld involvement in last month's party primary, in which his Likud party chose its candidates for parliament.

After he called elections in November, polls showed Mr Sharon's Likud party and its hardline allies winning a clear majority over the Labour Party and its partners. But the gap has eroded, throwing the election into doubt and suggesting that post-election coalition-building could be complex.

A poll to be published today in the Haaretz newspaper shows a big shift. The tracking poll, which had Likud winning 41 out of the 120 parliament seats a month ago, shows the party now at 27, with Labour winning 24 seats and the reformist Shinui party on 17.

Elyakim Rubinstein, Israel's Attorney General, confirmed that a police investigation was under way involving bank accounts in the names of Mr Sharon's sons, but echoed the Prime Minister's claim that the leak of the Justice Ministry document on the investigation was politically motivated.

Mr Sharon said it was "a disgraceful political slander" intended to cost him his political career and he would disprove the allegation.