Olmert to quit, leaving Mideast peace initiative to uncertain fate

JERUSALEM — Embattled Prime Minister Ehud Olmert announced Wednesday that he will resign in September, bringing a premature end to his hopes of leading Israel into a stable era of peace with its Arab neighbors.

Facing a deepening political corruption investigation, Olmert said he would step aside when his ruling Kadima Party chooses a new leader in seven to eight weeks.

Olmert made it clear that he was reluctantly stepping aside because the expanding corruption allegations had undermined his ability to lead the nation.

"I am not doing this because I cannot fulfill my responsibilities," Olmert said in a short, live televised address from his Jerusalem home.

"I believe with all my strength in my ability to continue in my mission, just as I believe in my righteousness and my innocence," he argued. "But this campaign of mudslinging occurring these days, even on the part of fair people who are truly worried about the state and its reputation, raises questions that I cannot and do not wish to avoid."

Olmert's decision will make it much harder for him to cement a legacy by securing landmark peace deals with Syria or the Palestinians before he leaves office.

"He is a lame duck and this curtails his ability to do anything really dramatic in the areas of war and peace," said Yossi Alpher, a former Israeli Mossad official who now serves as co-director of the political Web site.

Hopes of reaching peace deals by year's end were already a long shot, even before Olmert announced he would step aside. Now it is all but certain that the job will be left to his successor.

His announcement came as Secretary of State Condoleezza Rice met in Washington with top Israeli and Palestinian negotiators, including Tzipi Livni, Israel's popular foreign minister, and a candidate to succeed Olmert. Talks, re-launched at the Annapolis conference last November, appear to have made some progress, but the sides have revealed few details, and no breakthrough on key issues appears imminent.

Although Israeli, Palestinian and U.S. officials pledged Wednesday to continue negotiations, a deal is unlikely. Standing in the way are Olmert's weak standing, Israeli political upheaval that could last into October or beyond and emotional issues such as the status of Jerusalem, the fate of Palestinian refugees and the future of Jewish settlements.

Calls for Olmert to resign increased in May after American businessman Morris Talansky told Israeli police that he had given the Israeli leader tens, if not hundreds, of thousands of dollars in cash over the last 15 years.

Earlier this month, new allegations emerged that Olmert had double-billed companies and non-profit groups for travel and then used the money to pay for family vacations.

In his address, Olmert apologized for making unspecified mistakes in his career. But he blasted "self-proclaimed righteous fighters" who had staged "wicked attacks" meant to bring him down.

"Whoever is preaching morals to me today will need to one day face the truth as it rises to face them," Olmert said before leaving without taking questions from assembled reporters.

"I don't think this is cataclysmic," said Hanan Ashrawi, a moderate Palestinian lawmaker who served as part of the late-Yasser Arafat's negotiating team in the early 1990s. "I don't think Olmert was the great hope for peace and I don't think his resignation is the end of peace."

While Olmert battles the corruption allegations, Kadima Party leaders will be fighting for the right to take his place.

Olmert's most likely successor in Kadima is either Livni or Shaul Mofaz, the country's more hawkish transportation minister and former defense minister.

Livni is currently favored in polls by Israeli voters and members of the Kadima Party. But Mofaz is believed to be favored by Olmert, who has a frosty relationship with Livni and could make it hard for her to rise as Israel's second female prime minister.

The Kadima Party is scheduled to hold its first vote to choose a new leader on Sept. 17, with a second round scheduled a week later.

Once Olmert resigns, Israeli President Shimon Peres will have a week to name someone, probably the new Kadima leader, to form a new coalition government.

That person would then have up to 42 days to establish a new coalition. If the attempt failed, Israel would be thrown into elections within three months.

That could open the door for former Israeli Prime Minister Benjamin Netanyahu, the hard-line Likud Party leader who opposes peace talks with Syria and the Palestinians, to return to office.

Latest polls show Likud and a Kadima Party led by Livni in a dead heat among Israeli voters.

Olmert first took over as acting prime minister in January 2006 when Ariel Sharon suffered a devastating stroke from which he never recovered.

Two months later, Olmert led the newly created Kadima Party to a modest victory in elections. Olmert formed a center-left government with the Labor Party that was almost immediately tested when Hezbollah fighters in Lebanon captured two Israeli soldiers in a July 12, 2006 cross-border raid.

Olmert launched a costly 34-day war that failed to bring the soldiers home, emboldened Hezbollah in Lebanon and fatally damaged the prime minister's image at home.

(Warren P. Strobel in Washington and McClatchy special correspondent Cliff Churgin in Jerusalem contributed to this article.)