Israel's Odd Couple Splits Up

Despite the resignations of the Labor Party members of his government, Israeli prime minister Ariel Sharon said he will continue to lead, and the parliament approved his 2003 draft budget in its first reading.

Spending on Jewish settlements in the West Bank and Gaza Strip had been a major bone of contention between Sharon's Likud Party and Labor.

Sharon's declaration that he will continue to lead the country suggests he will not seek early elections.

With Labor leaving his coalition, Sharon is left with a narrow coalition that includes small far-right factions. Sharon's coalition chairman has said he expects Sharon to call early elections because such a government is not stable.

The next elections are scheduled for November 2003.

While the breakup of the coalition could lead to an election within 90 days, the political maneuvering could also drag on for months without resolution. Ben-Eliezer asked Sharon on Tuesday to begin talks on setting an election date, suggesting March or April as possibilities.

However, Sharon told parliament Wednesday that "we will continue to lead the country in a responsible and clear-headed way."

Labor had demanded a $145 million cut in allocations to settlers, a demand that was rejected by Sharon.

Parliament voted 67-45, with two abstentions to approve the spending plan. Two more votes are required before the budget has final approval.

The crisis ended an uneasy 20-month partnership between Likud and Labor that had been formed to steer the country at a time of intense conflict with the Palestinians. The political turmoil could sabotage U.S. efforts to win support for a three-phase peace plan that envisions Palestinian statehood by 2005.

Sharon was expected to maintain a narrow majority in parliament, meaning he would not be brought down by Labor's departure. However, a narrow coalition resting on small far-right factions is unstable, and Sharon's coalition chairman has said he expected the prime minister to call snap elections.

Israeli elections, possibly within 90 days, would delay implementation of the U.S.-backed peace plan. If Sharon continues to govern, his far-right partners would likely object to many of the provisions, such as a settlement freeze and a significant Israeli troop pullback.

Developments on the Palestinian side also suggested the peace plan would run into problems. The proposal calls for sweeping reforms of the Palestinian government and the security services. However, the Palestinians signaled Tuesday that they would settle for more modest changes; parliament approved a new Cabinet that was largely unchanged, with only three new ministers.

CBS News Correspondent Robert Berger reports many Israelis are saying it looks a lot like the old Cabinet which even many Palestinians believe was corrupt and incompetent. One key change that disappointed both the U.S. and Israel was the interior minister. A man regarded as a moderate and a reformer was replaced by an Arafat loyalist. Despite U.S. demands for a new Palestinian leadership, Arafat remains firmly in control.

Radical Palestinian factions Wednesday rejected the new cabinet approved by the Palestinian Parliament, saying its makeup is designed to follow American and Israeli dictates.

A coalition of 10 Damascus-based Palestinian opposition groups said the new Cabinet is part of a plan to reformulate Yasser Arafat's Palestinian Authority as a docile body that will suppress the Palestinian people in line with Israeli policy.

Throughout Wednesday, there were efforts to avert the breakup of the coalition. Sharon and Labor leader Binyamin Ben-Eliezer met for three hours in a parliament conference room. Shouts were heard from the room, and at one point, an angry Ben-Eliezer stormed out, only to return later.

In the end, Ben-Eliezer and other Labor ministers, including Foreign Minister Shimon Peres, submitted their resignations which will take effect within 48 hours.

"We did everything possibile to preserve the government, but to my great regret there were those who believed that this was the time to break up the government," said Finance Minister Silvan Shalom of Sharon's Likud Party.

Labor legislator Haim Ramon, who is challenging Ben-Eliezer for party leadership in Nov. 17 primaries, praised the decision. "I'm happy that we will not be partners in a government that is a failure in all aspects of life," Ramon said. "We need to leave the government and present an alternative."

Israel's coalition governments are chronically unstable and plagued by internal fighting. No government has completed its full term since the 1980s, and the country has had five prime ministers in the past seven years.

Meanwhile, two Israelis were killed in an attack on a settlement in the West Bank Wednesday.

A Palestinian gunman stormed into the Jewish settlement of Hermish in the West Bank and went on a shooting rampage. He crawled under the security fence and encountered two teenage Israeli girls whom he shot and killed. Then the gunmen fired at a house and killed a woman. Soldiers rushed to the scene and the intruder was shot dead.

More than 200,000 settlers live among more than 3 million Palestinians. Palestinian militants have vowed to drive them out of the West Bank and Gaza Strip.

The al-Aqsa Martyrs Brigade, a militant group affiliated with Yasser Arafat's Fatah movement, claimed responsibility for the attack on the small Jewish settlement of Hermesh, in which Tarek Abu Safaka, 22, the gunman, crawled under the perimeter fence.

Tzipi Kaliski, a Hermesh resident, said the gunman killed teen-age girls walking home and a woman who was at home with her husband.

Kaliski said she was in bed when shots rang out. "We all jumped," Kaliski said. "We started hearing screaming west of the house. We immediately shut the lights, locked the doors. My husband held his weapon near him."

"He (the gunman) saw the girls who had just walked out of the house ... and he started shooting at them," Kaliski said.

Kaliski said one of her neighbors began firing at the attacker, but that her weapon jammed. The gunman then entered the house of a couple who had returned to Hermesh just six months ago after leaving two years ago when Israeli-Palestinian fighting erupted.

Soldiers stationed in Hermesh heard the shooting and came running, Kaliski said. A gunbattle erupted and one of the soldiers killed the gunman.

In the Gaza Strip, Israeli troops raided the town of Beit Hanoun and arrested at least five suspected militants, the army said in a statement. Palestinians said 15 people were rounded up in house-to-house searches.

Soldiers, who conducted the raid in response to the firing of mortar bombs and missiles at Israeli towns bordering the Gaza Strip, found arms and explosives in the militants' homes, the army said.