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Labour cripples Sharon

Jerusalem, Oct. 30 (Reuters): Israeli Prime Minister Ariel Sharon’s national unity government collapsed today after his Labour Party partners said they were quitting in a battle over the 2003 budget.

“The Labour Party has decided to vote against the state budget and all the ministers are giving in letters of resignation,” foreign minister Shimon Peres, a Labour Party member, told reporters.

However, Israel’s parliament approved the controversial 2003 state budget in its first reading today despite no votes from the Labour party.

The 67-45 vote with two abstentions was taken shortly after Prime Minister Ariel Sharon’s main coalition partner, the Centre-Left Labour headed by defence minister Binyamin Ben-Eliezer, walked out in a dispute over funding for Jewish settlements.

To ensure passage of the austerity plan, Sharon obtained yes votes from small ultranationalist parties in the opposition.

After talks to save the coalition collapsed, Ben-Eliezer urged Labour lawmakers to reject the 269.9 billion shekel ($57 billion) spending package that included spending cuts of nearly two percent from 2002. Labour had wanted some funding now earmarked for Jewish settlements funnelled to Israel's poor.

The government was forced to chop spending in 2002 and again in 2003 to keep the budget deficit from spinning out of control as a worsening recession and a Palestinian uprising combined to curtail tax revenues and raise defence costs.

Sharon, whose Rightist Likud party forged a coalition with Labour 19 months ago, now faces the prospect of early elections or forming a narrow Right-wing government, with no end in sight to a two-year-old Palestinian uprising against Israeli occupation. Peres was speaking after the Labour Party chief and defence minister, Binyamin Ben-Eliezer, handed his resignation in to Sharon personally.

The Labour resignations take 48 hours to go into effect.

Asked how he felt on resigning, Peres said: “I feel like I’m in a crisis.”

After resigning, Ben-Eliezer urged Labour legislators to vote against the 2003 budget.

“I ask that we go below (to the Knesset chamber) and vote all of us as one party against the budget,” Ben-Eliezer said.

He was speaking after talks failed between Labour and Sharon’s Likud to resolve a dispute over budget disbursements to Jewish settlements in the occupied West Bank and Gaza Strip demanded by Likud.

Ben-Eliezer’s resignation paved the way for other Labour ministers to quit the “national unity” Cabinet formed in early 2001 to help fight a Palestinian revolt in the two territories.

“We made every effort in the last three days to preserve the national unity government. These efforts failed,” said finance minister Silvan Shalom of Likud. Sharon, a long-time champion of Jewish settlement building, has stood firm against reductions in spending on settlers living on occupied land in the West Bank and Gaza Strip.

The fate of 145 settlements is an issue at the heart of the Israeli-Palestinian conflict and has also left Israelis deeply divided. The international community largely regards the settlements as illegal.

Retired Israeli Gen. Meir Dagan, a hawkish supporter of Prime Minister Ariel Sharon, took office today as the head of the Mossad spy agency. Sharon named Dagan, one of Israel's leading counter-terrorism experts, in September as the successor to outgoing Mossad chief Ephraim Halevy.

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