Olmert lawyers quiz businessman

Mr Talansky's testimony has seriously damaged Mr Olmert's reputation

Lawyers for Israeli Prime Minister Ehud Olmert are questioning a US businessman at the centre of a corruption investigation against him.

Morris Talansky has already testified that he gave Mr Olmert envelopes full of cash in 2006, before the Kadima Party leader became prime minister.

The cross-examination is expected to go on for five days.

Mr Olmert has not been charged with any offence and denies any wrongdoing, but says he will resign if he is charged.

The allegations have damaged Mr Olmert's already low standing, correspondents say.

Expensive items

Speaking to investigators in May, Mr Talansky testified that he gave hundreds of thousands of dollars in envelopes full of cash to Mr Olmert, but said he did not seek or receive any favours in return.

The allegations against Olmert

Mr Talansky has said some of the money was used for expensive personal items, and funds intended as loans were never repaid.

Mr Olmert has said the funds were used legally for election campaigns.

Earlier this month, police said they were widening the investigation to investigation whether Mr Olmert had committed fraud by seeking "duplicate funding for his trips abroad from public bodies".

As a concession to avoid early elections, Mr Olmert said Kadima would hold a leadership election in mid-September. He has not said whether he will stand.