Ex-PM Barak: Labour to stay with Olmert for now

JERUSALEM, May 8 (Reuters) Former Prime Minster Ehud Barak offered Israeli Prime Minister Ehud Olmert's government a temporary lifeline today, saying he could serve in the coalition cabinet if elected leader of the Labour party.

Barak's stance could provide a reprieve to the increasingly fragile coalition government, which is led by Olmert's centrist Kadima party.

Analysts say Olmert's government was likely to collapse if centre-left Labour, Kadima's main coalition partner, pulled out.

Barak joined calls today for Olmert to resign following a scathing report on his handling of last year's war with Hezbollah guerrillas in Lebanon. Olmert has refused to do so.

Barak said he would be willing to serve for a limited period as defence minister under Olmert, but would still seek the formation of a new government or an agreed date with other parties in Israel's parliament for new elections as soon as is feasible.

''In view of the serious ... challenges which face Israel, I will be willing, if circumstances allow, to contribute from my experience ... to carry out the profound repairs required in the defence establishment and in the army,'' Barak told reporters.

Barak is a leading candidate challenging current Labour leader and Defence Minister Amir Peretz for the party's leadership. The party will hold internal elections on May 28.

Like Olmert, Peretz was harshly criticised by the government-appointed Winograd Commission that investigated the war in Lebanon.

Barak said Peretz had already ''in his own way drawn conclusions from the report's findings,'' an apparent reference to his decision to give up the defence post after the May 28 elections.

Barak said Olmert should follow the lead of Peretz and former army chief Dan Halutz, who has already stepped down.

''I believe that the prime minister, whom I admire and respect as an Israeli patriot, will also find the appropriate way to draw his conclusions, although so far this has not happened,'' Barak said.

Barak, who is not currently a member of parliament, and former Shin Bet chief Ami Ayalon, who is a lawmaker, are the two leading candidates to replace Peretz as head of Labour.

REUTERS AK MIR RAI2355