Livni calls for elections 'as soon as possible'

Israeli Foreign Minister Tzipi Livni called for snap elections on Sunday after failing to form a new government, dashing faint hopes of reaching a peace deal with the Palestinians in 2008.

"The people will choose their leaders," Livni said after meeting with President Shimon Peres at his residence in Jerusalem.

Livni's announcement came one month after Peres had appointed her to try to form a government to replace Prime Minister Ehud Olmert, who resigned amid corruption allegations.

Her efforts collapsed after the ultra-Orthodox Shas party said on Friday it would not join the government because of her refusal to accept its budgetary demands and to pledge not to discuss Jerusalem with the Palestinians.

"Recent days have turned the coalition demands impossible and I had to draw the line," Livni's office quoted her as telling her centrist Kadima party ministers before Sunday's weekly cabinet meeting.

"When it turned out that everyone was taking advantage of this opportunity to make illegitimate demands, both financial and regarding the peace process, I decided to stop all this and go for elections," Livni said.

The call for snap elections extends the country's political limbo for at least another three months and could lead to the demise of the already stalled US-backed Middle East peace process relaunched last November.

Both Olmert and Palestinian president Mahmud Abbas pledged to try to reach a deal before US President George W. Bush leaves office in January, but despite months of negotiations, the talks have made little visible progress.

Officials in Olmert's office told AFP that the beleaguered premier would continue the talks with Abbas in a bid to make "as much progress as possible."

But Olmert told the cabinet that when he opens parliament's winter session Monday he will "make short remarks on socio-economic issues" and not those on which there are "serious disagreements among the Israeli public."

"(Such issues) will continue to top the national agenda but... in current circumstances, I do not think it proper for me to discuss them," he said.

Palestinian officials close to the peace talks have insisted that Israel's political turmoil is an "internal matter" and that they hope to continue negotiations with whomever succeeds Olmert.

"We do not want to make peace with one faction in Israel... We want peace with all Israelis," senior Palestinian negotiator Saeb Erakat told AFP.

Recent polls indicate that the right-wing Likud party under the leadership of hawkish former prime minister Benjamin Netanyahu would emerge as the winner of the elections, with Livni's centrist Kadima coming in second place.

Likud MP Yuval Steinitz told AFP he welcomed Livni's decision.

"We are sure we will win the elections and afterwards we will form a broad unity government which will be able to face the economic crisis and the security threats from Iran and (the Islamist Palestinian movement) Hamas."

It nevertheless remained unclear if new elections, the fifth in less than 10 years, would allow a single party to form a stable coalition in the country's fractured 120-member parliament.

The centre-left Labour party, which had agreed in principle to join a government with Kadima, blamed Livni for the failure to avoid new elections.

Kadima MP Yoel Hasson meanwhile backed the call for early elections.

"Livni acted out of national responsibility and made the right decision. She decided not to give in to extortion. We will go to elections and Livni will win," Hasson told AFP.

Livni, a 51-year-old former Mossad agent, hopes to become Israel's second woman prime minister after Golda Meir, who held office from 1969 to 1974.