Peres Calls on Israeli Finance Chief to Quit

JERUSALEM —  In a move that threatens Israel’s fragile coalition government, Prime Minister Shimon Peres on Monday demanded the resignation of Finance Minister Yitzhak Modai, who publicly criticized Peres over the weekend.

The dispute erupted on the eve of a crucial convention of Peres’ leftist Labor Alignment. At the convention, Peres is expected to be pressured to break up the government before October, when, under the terms of the coalition agreement, he is to exchange posts with Foreign Minister Yitzhak Shamir, leader of the Likud Bloc.

By Monday night it was clear that there will be no showdown over the Modai affair until the regular Cabinet meeting Sunday. Modai is affiliated with the rightist Likud Bloc, and party leaders have vowed to support him against Peres.

Time for Mediation

At first Peres indicated that he would call a special Cabinet meeting Monday to force the issue, but later he agreed to postpone any such move in order to allow time for mediation. Labor officials said there might be a compromise under which Modai would give up the Finance Ministry but remain in the Cabinet in some other post. Modai ruled that out in a television interview Monday night.

Peres is said to be upset with remarks attributed to Modai in published interviews over the weekend. Modai reportedly called the much-traveled Peres a “flying prime minister” with little knowledge of economics who squanders government funds to save institutions affiliated with the Labor Alignment.

Apology by Modai

Israel radio reported Monday that Modai had sent Peres an apology earlier in the day. Nonetheless, the prime minister told Shamir in the course of a two-hour meeting that he intends to dismiss Modai. Shamir objected that such a move would be a violation of the coalition agreement and that it would mean the end of the so-called national unity government.

Both men canceled speaking engagements for the day as the crisis appeared to build. Finally, Peres agreed to postpone the special Cabinet meeting to allow the head of one of Israel’s small religious parties to try to mediate the dispute. The religious parties hold the balance of political power and could determine Labor’s ability to form a narrow government in place of the broad coalition with Likud.

Election Is an Option

The other option, should the government fall, is to hold an election. Labor proponents of breaking the coalition believe that the party is now in a strong position to win enough seats in a new Parliament to form a government. According to a recent survey by pollster Hanoch Smith, nearly three out of four voters approve of the way Peres has carried out his duties--a level never bettered by any prime minister in the decade that Smith has been conducting such polls.

The national unity coalition nearly collapsed late last year because of a similar dispute involving remarks made by Likud’s Ariel Sharon, who is minister of trade and industry. Peres backed down after Sharon apologized, but he vowed Monday that he would not do so in Modai’s case.