TEL AVIV, Oct 29: With no last-minute compromise in sight, the 18-month-old national unity coalition of Israeli Prime Minister Ariel Sharon appeared doomed on Tuesday ahead of a Labour revolt over the premier’s austerity budget.

Finance Minister Sylvan Shalom of Sharon’s right-wing Likud party said the budget, designed to tackle Israel’s worst-ever financial crisis, would go before a parliamentary vote on Wednesday after its first reading.

The centre-left Labour party has said it will not vote for the budget unless cuts are made to the 150-million dollar allotment to Jewish settlements in the occupied territories, which are the main cause of friction behind the two-year Palestinian uprising that has done so much to wreck the economy.

Labour wants the money rerouted to social spending and job creation. The current budget proposal foresees cuts of 1.8 billion dollars, much of it from social services.

Sharon has said anyone who does not back the 2003 budget as it stands will be out of his cabinet.

That would mean sacking five Labour ministers, including party leader and Defence Minister Binyamin Ben Eliezer and Foreign Minister Shimon Peres.

Media reports said Sharon had already offered the defence portfolio to General Shaul Mofaz, who retired as chief of staff in July.

If the coalition collapses, Sharon could try to stitch together a new alliance. Otherwise elections must be held within 90 days.

While political horse-trading was still underway in the wings to thrash out a possible compromise to save the broad-based but right-leaning cabinet, Sharon was speaking openly of “the possibility of early elections if efforts to form a new coalition with the right-wing fail.”

“If nothing extraordinary happens in the coming days, a mega-attack or a colossal catastrophe, we will enter a period of run-up to elections,” the daily Yediot Aharonot said.

“Labour are split. Party interests push them to break with Likud to position themselves as an alternative choice for the next elections. National interest push them however to back the budget for the economic stability of the country,” said Eytan Gilboa, a political scientist at Bar Ilan university in Tel Aviv.

“Labour is caught in a trap. Their leader, in a panic as he fights for survival ahead of the party’s primary elections on November 19, has presented a pathetic image of the party in this crisis,” he added.

“A last-minute compromise may be possible but in any case Labour are on the ropes, either because they have damaged the economy by voting down the budget, or for having plunged the country into elections when the threat of war with Iraq is looming,” he said.

Interior Minister Eli Yishai, who is also leader of the ultra-Orthodox Jewish party Shas, predicted on Israel Radio that even if Sharon enlists the far-right in a new coalition with a narrow majority, the alliance would not last long.

Sharon has already fallen out with the ultra-nationalist National Union-Yisrael Beitenu bloc, whose ministers quit his cabinet earlier this year accusing him of not being tough enough against the Palestinian uprising.

“Labour will be part of a national unity government” after fresh elections, Yishai said, predicting on public radio that polls would be held between February and May.

The general elections are officially scheduled for October.

Sharon’s confidence in the looming face-off with Labour was likely to be boosted by latest opinion polls which showed his Likud party outstripping Labour, and him personally outdistancing his main party rival Benjamin Netanyahu to choose a candidate for premier.

According to a poll in the daily Yediot Aharonot, Likud would win 29 seats in the 120-member parliament in snap polls, up from 19 at present.

Labour would only win 21 seats in parliament, down from its current 25, while Shas would win 13 seats, down from its current 17.—AFP