Barak defies calls for early elections

Bad news: Barak grimaces as the Knesset vote comes in

Israeli Prime Minister Ehud Barak has said there will be no early elections in the country, despite his defeat in a crucial parliamentary vote.

He said ministers in his coalition government who voted against him had "dismissed themselves".

An angry Mr Barak said that his domestic political difficulties would not derail the Middle East peace process.

"My mandate comes directly from the people, and what occurred in the Knesset will not prevent me from concluding an agreement with the Palestinians and, if possible, with Syria," he said.

The Orthodox Shas movement, and two other government parties, backed an opposition bill which could lead to the dissolution of parliament.

The bill must go before a parliamentary committee, and pass two further readings in parliament before becoming law - a process which could take months.

The defeat in the Knesset comes at a particularly sensitive time for Mr Barak, with US Secretary of State Madeleine Albright visiting the Middle East to assess peace prospects.

Schools dispute

The crisis began when Mr Barak called off talks with Shas in a long-running dispute over funding for the Orthodox schooling system.

The party's response was to vote with the opposition.

Mr Barak now faces the choice of either giving in to the financial demands being made by Shas or of reconstituting his government entirely.

Shas was reported by Israel Radio on Tuesday as saying it would reconsider its support for the bill if Mr Barak renewed negotiations.

One alternative for Mr Barak would be to invite secular parties such as Shinui to join his One Israel coalition, but this would mean ruling with a minority government and relying on the support of the Arab parliamentarians to pass controversial legislation.

Essential support

Although Shas has only 17 members in the 120-seat Knesset, it is nevertheless the second biggest party in the ruling coalition, after Mr Barak's own Labour Party, and its support is essential for the government to secure a majority.

Finance Minister Avraham Shohat said it was possible that Mr Barak could form a coalition which would have the support of by 62 MPs - including the 10 Arab deputies and three secular parties currently outside the government.

The parties in the current government have 68 MPs in the 120-member parliament.

On Tuesday, Mrs Albright met Mr Barak and Palestinian leader Yasser Arafat, who has agreed to meet President Bill Clinton for a fresh round of talks in Washington next week.

It is uncertain whether Mr Barak will take part in the US plan for a three-way summit.