Israel's Olmert won't fire rebellious minister

JERUSALEM, May 6 (Reuters) Israeli Prime Minister Ehud Olmert opted today against firing his deputy, Foreign Minister Tzipi Livni, saying they would continue to work together despite her call for his resignation.

Livni issued a public call last week for Olmert to step down following the release of an official report sharply criticising his handling of last year's war in Lebanon.

A statement issued by Olmert's office after the two met today said they ''agreed to continue to work together as part of the government headed by Ehud Olmert''.

Olmert's office said the brief meeting, at the end of a regular cabinet session, dealt with diplomatic issues rather than any personal differences.

''The international ties of the state of Israel are definitely not a personal matter for me or for the prime minister. This is why I am in the government,'' Livni, a member of Olmert's Kadima party, told reporters before the meeting.

Olmert has so far successfully fended off calls from Livni and others to resign, but many see his reprieve as temporary.

The government's main coalition partner, the left-leaning Labour party, is considering bolting, a move that could trigger snap elections.

The government-appointed commission investigating the Lebanon war will issue a final report in the coming months that could call for Olmert's removal.

The prime minister is also the focus of several corruption investigations.

Livni's appeal as a relatively fresh, new face in a political elite tarnished by corruption allegations may have been dented by her unsuccessful revolt against Olmert.

While calling publicly for him to go, Livni, a former intelligence operative, chose to remain in the cabinet when he refused. Some lawmakers and analysts sharply criticised her decision to stay.

RIVALS Olmert faces other rivals, however, within Kadima, a centrist party founded two years ago when then prime minister Ariel Sharon bolted from the rightist Likud.

Former Prime Minister Shimon Peres, 83, and currently deputy prime minister, is seen by some as capable of restoring Kadima's fortunes. He joined the party from Labour.

Labour itself is in the midst of a power struggle ahead of a leadership election on May 28 that seems likely to unseat Amir Peretz.

As defence minister, Peretz was found by the government-appointed Winograd commission to share much of the blame with Olmert for failures in the war against Hezbollah last summer.

Peretz said yesterday that as he had already announced his intention to relinquish the defence post after Labour's internal election, he would not heed public calls to resign now over the inquiry's findings.

The commission said in its interim report last Monday that Olmert had ''made up his mind hastily'' to launch the campaign against Hezbollah and accused him of ''a serious failure in exercising judgment, responsibility and prudence''.

REUTERS KK BD1710