After 28 years as mayor of Jerusalem Mr Kollek, 82, lost not on any broad issue of principle but largely because he was too old - and the humiliation of this was written on his face as he acknowledged defeat on Tuesday night, grim and bowed. Jerusalem has always been a Likud city at heart, but in municipal elections Jewish voters have gone for Labour's 'Teddy' just because he was 'Teddy', the man with the vision, the can-do mayor, who could soothe the city's many fevers, who spoke calmingly of 'Arab Jewish co-existence' but never gave an inch on Israel's claim to sovereignty over all the city.
Respected he most certainly was, but recently Mr Kollek, who failed to groom a Labour successor, has undermined himself too often in the eyes of the voters who, for the first time, were given a credible Likud candidate as an option. 'I wouldn't vote for someone as old as me,' he said earlier this year, before changing his mind and deciding to stand. 'I am resolved in my desire to leave soon. I simply cannot stand it.'
While the manner of his going was a somewhat demeaning story, the fact that he has gone is of far- reaching significance, for Jerusalem, for the Labour government of Yitzhak Rabin, and for the peace process that has recently made such swift progress. Mr Rabin is riding high on the success of his peace deal with the Palestinians, which grants self-rule in the West Bank and Gaza Strip. The deal's success so far is due in part to the fact that it does not address the most contentious issue of all, the future status of Jerusalem. The Palestinians want Arab East Jerusalem, seized by Israel in the 1967 war, to be the capital of their future state. Israel says the city should remain forever united under Israeli 'sovereignty'.
The longer these rival claims can be deferred the better, as far as Mr Rabin is concerned, and in this Mr Kollek was his key ally. Mr Kollek's single greatest achievement from Israel's point of view was in using his phenomenal public relations skills to keep Jerusalem off the political agenda, while at the same time shoring up the Jewish claims to the city by promoting Jewish settlement in the Arab East. Now in comes a young, thrusting Likud mayor who is certain to use his new position to politicise Jerusalem at every turn, and to use his stronghold in the municipality to create a new focus of opposition to Mr Rabin's peace deal.
Mr Olmert is a 48-year-old lawyer from one of the most prosperous firms in Jerusalem. A former minister of health under the previous Likud government, he was known as a moderate voice. Nevertheless, for the Labour government his election can only be bad news. Tensions over control of the city will be exacerbated, international attention will focus more on this unresolved question, and no longer will it be possible to set Jerusalem to one side in the negotiations.
By the same token, however, the rise to power of a Likud mayor may benefit the Palestinian cause. Key figures in the Palestinian community are quietly celebrating the result, as are Israeli liberals, who now believe that a debate on Jerusalem will finally begin.
In terms of their policy on Jerusalem's status, Mr Kollek and Mr Olmert seem little different. Both seek to force Jewish control over the whole city by building Jewish settlements. Mr Rabin has described Mr Kollek as the 'greatest builder since Herod'. From the top floor of the grand new municipality building it is possible to see the clouds of white dust rising from the tracks of bulldozers, carving out building land in Arab East Jerusalem.
Mr Kollek has presided over a massive demographic change in the city. The total population is 570,000. Of this, 155,000 are Palestinians living on the East side. For the first time this year, the number of Jews living in settlements on the East side has reached 160,000, outstripping the number of Arabs.
Mr Kollek has nevertheless succeeded in defusing widespread international criticism of his settlement drive. He has won praise for speaking out against the most aggressive Jewish takeovers of Arab homes and lands, in the Old City, for example. He has also managed to promote the concept of a 'mosaic' of Jewish and Arab areas, and barred settlement inside the Arab enclaves, building around them instead.
Mr Olmert is certain to pursue the same building policies, but he has already made clear that he will do so with greater vigour. He says that Jews should have the right to build on all the land of Jerusalem, and this is sure to be taken as a signal from radical settlers to take over Arab lands wherever they have the chance. Conflict, therefore, looms in a city where tension is never far below the surface.
When the election results were declared, Mr Rabin could not conceal his dismay. 'What happened in Jerusalem has negative implications for us,' he said. 'I do not deny this or play it down. This is the truth and it is a very unpleasant one.'
The question remains: what will the government do now about Jerusalem? Under the terms of the peace deal, Jerusalem cannot be discussed until self-rule has been established in the Occupied Territories for three years and a second set of talks on their final status has begun. The pressures to speed up the debate on the status of the city have already been steadily building.
Jerusalem is the natural economic, social and cultural 'capital' of the West Bank and attempts to sever it from its hinterland will become increasingly unrealistic as self-rule is established in the occupied territories. Yasser Arafat, the chairman of the Palestine Liberation Organisation, cannot be seen to be giving up on his claim to sovereignty over the East of the city.
Already accused of 'selling out' by agreeing to limited self-rule, Mr Arafat will seek increasingly to assert a presence in Jerusalem as the negotiations proceed. He has even hinted at plans to visit the city when he returns to the West Bank early next year, and to pray at the al Aqsa mosque.
While the public Israeli position remains that there be 'no discussion' of the Jerusalem question, some on the left of the Labour Party have begun to propose long-term compromise solutions. There has been talk of a 'borough' system, whereby the Palestinians would be granted some limited autonomy. In academic circles the idea of a 'shared sovereignty' for Jerusalem is gaining ground again, as are proposals for granting the city an international status.
As long as the 'liberal' Mr Kollek remained in office it was possible for Israeli governments to reject all such ideas. Paradoxically, Mr Olmert's presence in the mayoral seat may force all parties to look at such solutions in the future.
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