Israel headed today towards an early election likely to kill any remaining chances for a peace deal with the Palestinians this year after ruling party leader Tzipi Livni dropped efforts to form a government.
"When I had to decide between continued extortion and bringing forward elections, I preferred elections," Kadima chief Ms Livni told the Yedioth Ahronoth daily, in reference to budgetary demands from the ultra-Orthodox Shas party.
Ms Livni said in a statement issued by her office that Kadima, "having proven it does what is right," would win the parliamentary poll, which political commentators forecast would be held on February 17th, more than a year ahead of schedule.
Ms Livni, foreign minister and chief peace negotiator in US-sponsored talks with the Palestinians, was due to meet President Shimon Peres later in the day to inform him she had failed to put together a coalition after weeks of wrangling.
MR Peres can then set into motion a process leading to an early election. Opinion polls have predicted the right-wing party of former prime minister Benjamin Netanyahu, an opponent of wide-ranging territorial compromise, would win the ballot.
"We hope the Israelis will choose to stay the course with the peace process," Palestinian peace negotiator Saeb Erekat said.
The United States had hoped for at least a framework deal on Palestinian statehood before President George W. Bush leaves office in January.
But with negotiations so far showing few signs of progress - with Israeli settlement expansion and the future of Jerusalem key stumbling blocks - and Israel's political scene in turmoil, there appeared to be little chance of an agreement.
While Israel gears up for an election, it will continue to be led by prime minister Ehud Olmert, who resigned in September in a corruption scandal but stays on under law until a new government is formed.
"It is not a happy announcement," Mr Olmert, speaking at the weekly cabinet meeting, said about Ms Livni's decision, which will keep him in power as a lame duck.
Ms Livni's own comments may indicate she intends to fight an election campaign that portrays her as a woman of principle to an electorate disillusioned with coalition haggling and suspicions of wrongdoing at the top.
"When it became clear that parties were taking advantage of the opportunity to pose illegitimate demands, both economic and political, I decided to stop and move ahead with elections," Ms Livni said in her statement.
Shas, which bills itself as a party representing Israel's poor, has long been a maker and breaker of coalition governments. It has garnered popular support through its network of religious schools and social welfare services.
The party, guided by an elderly rabbi and a major force among Israeli Jews of North African and Middle Eastern descent, had also sought guarantees Livni would not agree to share control of Jerusalem with the Palestinians.
"Jerusalem should not be divided," Shas leader Eli Yishai told reporters. "She informed us (she could not promise this)."
Reuters