Israeli Labor Party Gives Leaders OK to Quit Coalition : Mideast: The action reaffirms split with Likud over lack of progress in the peace process. A no-confidence vote Thursday could bring down the government.

TIMES STAFF WRITER

Israel's Labor Party, underlining the sharp split with its Likud Party coalition partners, Monday authorized its leaders and Parliament members to quit the national unity government over lack of progress on the peace process with the Palestinians.

Closing ranks behind Shimon Peres, the party leader, Labor's Executive Bureau and Central Committee, in separate votes, instructed the Parliament members "to take the necessary steps to draw the necessary conclusions" to break with Likud, an act that would bring down the 15-month-old coalition.

What was a procedural step to cement Sunday's Labor-Likud split over the peace process in a meeting of the so-called Inner Cabinet was marked by rhetoric that left little room for compromise.

"We have reached a conclusion that (Prime Minister and Likud leader Yitzhak) Shamir will try to run a policy of saying neither yes or no. He will try to avoid a decision and will pull us into the desert of indecision," Peres said.

Specifically at issue is an American formula to get Israel and the Palestinians to talk peace for the first time in their long conflict. After Monday's Labor meetings outside Tel Aviv, however, the party's position appeared to harden, setting the stage for a possible collapse of the government in no-confidence votes scheduled Thursday in the Parliament.

Religious Affairs Minister Zevulun Hammer of the National Religious Party met Monday with both Shamir and Peres to try to work out a compromise and save the coalition but made no immediate progress. Peres termed it "a modest contribution," and Defense Minister Yitzhak Rabin, the No. 2 man in Labor, told reporters: "When he'll come back with a positive response from Likud (on the American initiative), you'll get my response."

As it has been throughout the coalition talks for the past week, the issue of Jerusalem was the touchstone of the dispute. Both Peres and Rabin insisted that they, no less than Shamir and his supporters, endorse the position that Jerusalem is the indivisible, sovereign capital of Israel and would not be part of any negotiations on Palestinian autonomy in the occupied West Bank and Gaza Strip.

"Their doubts don't deserve to touch the soles of our feet," said Rabin, referring to Likud demands that the Jerusalem issue and others be hammered out before responding to the American proposal.

Ten days ago, President Bush's press conference remark that the United States opposes new settlements in the occupied territories, mentioning specifically East Jerusalem, torched a bonfire of objections from Israeli politicians. U.S. policy holds that Jerusalem should remain unified but that its status should be decided in negotiations.

"We have a dispute with the Americans over Jerusalem," Peres told Labor Party members Monday. "We say no to the policy of Bush and (Secretary of State James A.) Baker on Jerusalem."

Nevertheless, the Labor leadership held to its threat that the coalition must give Baker a positive response to his formula for initial Israeli-Palestinian talks or Labor would pull out of the government.

By pressing for assurances on other issues, Peres insisted, Shamir made a mistake, "merely to cover up for his inability to make a decision." Labor, he said, "will look for an alternative that will allow us to proceed with the peace process."

Rabin added: "Likud has for no reason cut short the peace process. . . . With no progress toward peace, there is no justification for the national unity government."

Shamir had no immediate response to the Labor Party decisions.

Political analysts said the prime minister might take the option today of firing all Labor ministers from the Cabinet. They noted that the Labor resolution itself was not strongly worded, endorsing only "necessary steps," which might not give Shamir cause to sack the party's ministers.

The analysts, quoted in the Jerusalem press, suggested that Labor ministers might instead resign on Wednesday. Under parliamentary protocol, the resignations would not be effective for 48 hours. The result, the analysts pointed out, would preserve a place for Labor in a transition government if the coalition falls on Thursday.

In the case of a successful no-confidence vote, which Labor apparently intends to support, both Likud and Labor might try to form a so-called narrow government, and failing that, general elections would be called.

Neither side seems eager for new elections, but there seems little room for compromise with tempers running high. Consultations by middlemen are expected to continue.

The current peace plan was put forward by Shamir last spring. It proposes the election of Palestinian representatives to discuss limited autonomy in the occupied territories. The final status of the territories would be decided in later negotiations.

The initial step, which would bring about the first direct Israeli-Palestinian negotiations, requires formation of a panel of Palestinians to discuss arrangements for the elections. The U.S. proposal is designed to temporarily sidestep Israeli concerns over Palestine Liberation Organization influence on the panel and the question of representation in the process of the 140,000 Palestinians living in East Jerusalem.

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