Netanyahu lifts threat to resign

Binyamin Netanyahu is Ariel Sharon's main rival to lead Likud

Israeli Finance Minister Binyamin Netanyahu has lifted his threat to resign over plans to withdraw Jewish settlers from Gaza.

Mr Netanyahu has been a fierce critic of the plan championed by Likud party rival Prime Minister Ariel Sharon.

He had threatened to resign unless the plan was put to a referendum.

He told Mr Sharon he changed his mind because the death of ailing Palestinian leader Yasser Arafat could create a "new reality", Israel Radio reports.

Mr Netanyahu said a new Palestinian leadership could open the way for negotiations with the Palestinians on what has been a unilateral plan to quit Gaza and parts of the West Bank.

"In this new situation, I decided to stay in the government," the radio quoted him as telling Mr Sharon.

Mr Arafat, the 75-year-old chief of the Palestinian Authority, is in a deep coma in a French hospital near Paris.

Earlier on Tuesday, The National Religious Party, a partner in Mr Sharon's coalition, withdrew from the government, eroding its majority to just 55 votes in a 120-member parliament.

Leadership rival

Jewish settlers have staged frequent rallies to protest against the withdrawal plan.

However, polls have consistently shown that the prime minister's plan is backed by Israelis as a whole.

The settlers want to show they cannot be ignored

Mr Sharon says he is determined to go ahead with the plan, which has been rejected twice by his Likud party.

Mr Netanyahu is a former prime minister and the leading rival to Mr Sharon for the leadership of Likud.

Jewish settlements in Gaza and the West Bank are considered illegal under international law and Israel has committed itself to freezing settlement activity under the international peace plan known as the roadmap.

About 8,000 Jews live in 21 settlements in the Gaza Strip, alongside 1.3 million Palestinians.

Israel is planning to pull all its settlers from Gaza and the troops that protect them as part of a disengagement plan. Israel will maintain control of Gaza's borders, coastline and airspace. Four West Bank settlements are also to be evacuated.