SLUG: 2-295902 Israel Politics (L Update)
TITLE=ISRAEL POLITICS (L UPDATE)
INTRO: Israeli Prime Minister Ariel Sharon's coalition government fell apart Wednesday as Cabinet ministers from the Labor Party resigned in a dispute over funding for Jewish settlements. Labor ministers, including Defense Minister Binyamin Ben-Eliezer and Foreign Minister Shimon Peres, quit after the failure of last minute talks to avert a break-up. Larry James reports from Jerusalem.
TEXT: Soon after Mr. Ben-Eliezer's resignation came word that the rest of the Labor members of the government had done the same.
The resignations are to take effect in 48 hours.
Mr. Ben-Eliezer also called on his party to vote against Mr. Sharon's 2003 budget. The Labor Party leader had threatened to pull out of the government if Prime Minister Sharon did not agree to cut budgeting for Jewish settlements and use the money for social programs.
The resignations came after a day of intense negotiation and what looked like a solution to the crisis. And in mid-afternoon came an announcement that a tentative agreement resolving differences had been reached.
Even with Labor's withdrawal from the government Prime Minister Sharon is expected to maintain a narrow majority in parliament, meaning he would not be brought down by Labor's departure.
But Mr. Sharon must either build a new coalition with small right wing parties or dissolve the government, an act that would trigger new elections within 90 days.
The crisis ended an uneasy 20-month partnership in an association that had been called a government of national unity.
The long-time political foes had come together at a time of intense conflict with the Palestinians.
The political upheaval could affect U.S. efforts to win support for a three-phase peace plan that would lead to an independent Palestinian state by 2005.
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