Police quiz Israel's Olmert on suspected corruption

JERUSALEM, Oct 9 (Reuters) Police today questioned Israeli Prime Minister Ehud Olmert over suspected corruption just as he appeared to have won a reprieve from a Lebanon war inquiry key to his political future and peace moves with Palestinians.

Israeli newspapers said a commission examining the 2006 Lebanon war, a conflict seen by many Israelis as a mistake, would not call on Olmert to resign despite its criticism in an interim report in April of his decision to launch the campaign.

''It is not our duty to offer a political bottom line, which determines whether the prime minister is suitable to serve in his position,'' the Haaretz newspaper quoted the government-appointed Winograd Commission as saying.

''No heads will roll,'' Israel's biggest newspaper, Yedioth Ahronoth, said in a headline, a day after Olmert, 62, told parliament he was determined to advance the peace process with the Palestinians.

A spokesman for the panel, asked about the newspaper reports, said the five-member board had not issued any statements recently. It is widely expected to publish its final findings in December.

At Olmert's home, police questioned him for five hours over suspicions that he tried, as finance minister in 2005, to tailor a sale offer for state-owned Bank Leumi to favour a friend, who ultimately never bid on Israel's second biggest bank.

Olmert has denied any wrongdoing in the case. After fraud squad investigators left the prime minister's residence, a police spokesman said they would return there on Thursday to question him again.

The Israeli leader is under another criminal investigation, which he described as ''needless'', into accusations he dispensed favours in return for a discount on the purchase price of a Jerusalem home in 2004. Olmert bought the house for 1.2 million dollars and media reports said 320,000 dollars was knocked off the price.

INVESTIGATIONS Israel's attorney-general is also considering whether to order a probe into suspicions that Olmert, as trade minister in 2003, appointed cronies to a state business authority and helped secure funding for a factory represented by his ex-law partner.

The cases, which Olmert has called baseless, have raised questions about his political survival as he prepares for a US-led West Asia conference next month and awaits the Lebanon war commission's final report.

Israeli Vice Premier Haim Ramon welcomed the Winograd panel's reported reprieve, saying it would give Olmert, leader of the centrist Kadima party, political breathing room.

Calls within his coalition government for his resignation after the interim report largely fizzled, in apparent recognition of opinion polls predicting a strong showing for opposition leader Benjamin Netanyahu if new elections were held.

In its interim findings, the commission said Olmert ''made up his mind hastily'' to go to war in July 2006 after Hezbollah guerrillas seized two Israeli soldiers, who are still missing.

Olmert said Hezbollah was weakened in the conflict.

But in a blow to the West Asia's mightiest military, Hezbollah fired 4,000 rockets into Israel during the 34 days of fighting. Israeli planes bombed southern Beirut neighbourhoods, Hezbollah strongholds.

Hezbollah said it won the war, in which 158 Israelis were killed, including 41 civilians caught in rocket strikes. Some 1,200 people, mostly civilians, were killed in Lebanon.

REUTERS SG HS1949