Lyse Doucet reports from Jerusalem (Dur 1'00)

The Israeli parliament has approved the 1998 budget, averting a political crisis for the coalition government led by Benjamin Netanyahu.

The government's victory margin was wider then expected: 58 votes to 52 with one abstention.

The vote came just a day after the Foreign Minister, David Levy, announced his resignation and withdrew the support of his faction from the government.

Mr Netanyahu's coalition now has a bare majority in parliament.

The BBC Jerusalem correspondent says the next big hurdle for Prime Minister Netanyahu will be to rescue the Middle East peace process.

The American envoy, Dennis Ross, arrives in Israel on Tuesday, and he will be seeking to persuade Mr Netanyahu to make a specific commitment within the next two weeks on the redeployment of Israeli troops in the occupied territories.

Israeli journalist David Makovsky doubts the current government will see the year out (Dur 4'03)

Political analysts said if the budget had been defeated, Mr Netanyahu may have been forced to call a general election, putting peace moves in jeopardy once again.

David Levy, who is now in opposition, still sits next to the Prime Minister

Mr Levy has said he would run for Prime Minister in any new poll. He has accused the government of imposing austerity on the poor and abandoning the peace process.

Mr Netanyahu, has vowed to go on with a minimal parliamentary majority, in spite of Mr Levy's resignation.

He expressed his regret at the resignation and said he hoped Mr Levy would change his mind. He also assured journalists his government would continue until its full term in 2000.

"I say to [the opposition]: don't be in such a hurry to smile ... I believe the coalition will continue," said Mr Netanyahu.

Responding to Mr Levy's attacks on the government's handling of the Middle East peace process, the Prime Minister said the government was on the brink of resuming talks and "doing the right thing to bring about a secure peace - not just a peace on paper."

The Palestinian Liberation Organisation fear the crisis will further delay progress towards peace.

"The very precarious state of the coalition and the possibility of elections will be used as a pretext to put the peace process on hold or to move to more extremist positions," said the Palestinian Education spokeswoman, Hanan Ashrawi.
 

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