Israel's Labour holds runoff vote for new leader

JERUSALEM, June 12 (Reuters) Israel's Labour Party voted in a runoff leadership election today pitting former prime minister Ehud Barak against ex-intelligence chief Ami Ayalon, arace that may help decide Prime Minister Ehud Olmert's future.

Opinion polls predict a close contest with a slight edge to Barak, who won a first round of voting last month, defeating Defence Minister Amir Peretz.

Left-of-centre Labour, the main partner of Olmert's centrist Kadima party in the coalition government, is holding a runoff for the first time because none of the original five candidates crossed a required 40 per cent threshold in the first round.

Barak and Ayalon, both former military leaders, have called on Olmert to resign after an official report criticised his handling of a war against Hezbollah guerrillas in Lebanon last year, and could force his ouster and an early national election.

But neither has said they would immediately bolt Olmert's coalition once elected, and may give him breathing space at least until the commission issues a final report due in August.

Labour ministers seem unwilling to risk their posts in a major coalition realignment or in an early election which opinion polls suggest would now favour former premier Benjamin Netanyahu and his right-wing Likud party.

Many analysts expect the new Labour leader to replace Peretz as defence minister and to use that post as a platform to prepare for a challenge for higher office.

In a survey published as the polls opened for some 103,000 Labour Party members, Israel's Channel 10 television predicted a victory for Barak with 46 per cent to 39 per cent for Ayalon.

But a poll in the business daily Globes found the two in a statistical dead heat, with 51.5 per cent for Barak to 48.5 per cent for Ayalon.

The Labour polls close at 2330 hrs IST when Israeli media will release the results of exit polls. Final results may not be published until early tomorrow morning.

Both Barak and Ayalon are more popular than Olmert, whose popularity has plummeted to the single digits.

A former head of the navy and the Shin Bet security service until his retirement in 2000, Ayalon worked as a peace activist and was elected to parliament for the first time a year ago.

Ayalon had been favoured to defeat Barak today's voting after Peretz, the outgoing leader, threw his support behind him. But some key players have swung to Barak in the past few days.

Barak, 65, a decorated commando general and former head of the armed forces, stepped down as prime minister in 2001 after a Palestinian uprising erupted and peace talks collapsed. He has since had a successful business career.

Barak's security past has aided his political comeback efforts in the aftermath of the Lebanon war and Palestinian rocket attacks from Gaza.

REUTERS SG KN1428