Eyeing Olmert pact, Israel's Labour seeks new head

JERUSALEM, May 27 (Reuters) Israel's Labour Party is likely to choose a new leader tomorrow to replace Amir Peretz, the defence minister weakened by the costly war in Lebanon.

The vote may also be a referendum on whether the traditionally dovish Labour should continue to support embattled Prime Minister Ehud Olmert despite his wartime failures and the current deadlock in peacemaking with the Palestinians.

Challenging ex-trade union boss Peretz are two old warriors: former prime minister Ehud Barak and retired admiral Ami Ayalon.

Both want to keep Labour in coalition with Olmert's Kadima party -- but Ayalon might prove the more difficult partner because he has said he wants Olmert to quit immediately.

Peretz appears to have little chance of keeping his party post after an official inquiry into last year's 34-day offensive against Lebanese Hezbollah guerrillas slammed him and Olmert for their relative ignorance in matters of national security.

Barak has criticised Olmert, yet said he would serve under him, potentially bringing a much-needed military pedigree to the government as it deals with Palestinian rocket attacks and what Israel sees as the strategic threat of Iran's nuclear programme.

Ayalon has also signalled that he would not withdraw from the government. But his call for Olmert to resign over the war raises the prospect that the prime minister might drop Labour under Ayalon and seek new partners on the political right.

Barak is dogged by memories of his time as premier from 1999 to 2001, when Israel abandoned its occupation of south Lebanon and failed to secure a peace deal at a whirlwind summit with the Palestinians. Major fighting was to follow on both fronts.

Barak became a high-flying international business consultant after losing the 2001 national election, raising hackles among centre-left Labour's rank-and-file. He also drew unfavourable headlines by divorcing his wife of many years, Nava.

''Barak is part of the problem,'' said political analyst Amotz Asa-El. If Barak won, he said, ''it would show that this election in not about ideology, but opportunism. It is about 60,000-odd party voters deciding how best to stay in power''.

Ayalon is a former head of the Shin Bet internal security service turned peace campaigner, whose corruption-free image appeals to Labour members irked by a slew of graft and sleaze allegations against Olmert and some cabinet colleagues.

Should Ayalon win, Asa-El said, ''the meaning will be that Labour voters understand the Israeli public needs a completely new message''.

But many in Labour feel that, with a newcomer like Ayalon at the helm, their party would fare badly in a future election against the centrist Kadima or the rightist Likud, led by former prime minister Benjamin Netanyahu.

Reuters SG RS1713