Ze'ev Binyamin Begin, the son of the former prime minister, Menachem Begin, has accused Mr Netanyahu of giving up Jewish land to what he called "Palestinian terrorists". Speaking to reporters on Monday he said that Israel could still prevent the creation of a Palestinian state.

Benny Begin, as he is known, is an influential right winger with a reputation for uncompromising views and an honest approach.

Benny Begin: "Territory for peace turned into territory for terror."

Correspondents say that although Mr Begin lacks a solid power base, his defection from Mr Netanyahu's Likud Party is another blow to the prime minister.

Earlier, the Palestinian leader, Yasser Arafat, accused the Israeli prime minister of using the impending elections as an excuse for freezing the peace process.

Election date agreed

Mr Netanyahu has been under fire from all sides for his handling of the peace process. Last week Israel's parliament, the Knesset, voted to bring forward elections.

The major parties agreed on Monday that voting will take place on 17 May, 1999. The date must be approved by the law committee and the Knesset, but this is expected to be a formality.

Tough talk

Launching his bid for re-election as party leader, he defended his handling of the peace process and warned a vote for the opposition Labour Party was a vote for Palestinian leader Yasser Arafat.

Begin says Netanyahu has gone soft on the Palestinians

"Arafat intends to unilaterally declare [on 4th May] a Palestinian state with Jerusalem as its capital. Now, I hear that he is considering postponing that declaration so that, God forbid, it will not help me win the elections.

"Well, I can reassure him. I will win either way," Mr Netanyahu told the party's central committee.

Four other prominent right-wing and centre-right figures have already announced their candidacy for the premiership, but Israel's hawkish Foreign Minister Ariel Sharon and Jerusalem Mayor Ehud Olmert have both announced they will not seek the party's nomination.

Mr Sharon, a former General, urged his Likud Party colleagues to back Mr Netanyahu and "close ranks around the man who was elected to head the movement because there is simply no other choice in a democracy."

Commentators say the decision by the popular Jerusalem mayor not to stand could be enough to salvage the embattled prime minister's chances of winning his party's nomination.