Israeli Feud Jeopardizes Peace Talks : Mideast: Interior minister resigns over secular policies of education minister. Rabin may no longer have a coalition capable of ratifying any agreement with Arab neighbors.

A key component of Prime Minister Yitzhak Rabin’s coalition broke away Sunday in a feud with another party in his Cabinet, threatening both the government’s stability and Israel’s ability to pursue peace negotiations with its Arab neighbors.

Interior Minister Arye Deri resigned from the Cabinet, declaring that his Shas party with its ultra-Orthodox religious orientation could no longer accept the secular policies of Education Minister Shulamit Aloni, leader of the liberal Meretz party.

Rabbi Shlomo Hananya, Shas’ secretary general, added that Shas also objects strongly to the government’s recent concessions to the Arabs, particularly the Palestinians, and to its overall strategy of accelerating negotiations in hopes of agreeing soon on Palestinian self-government.

If Rabin fails to work out a compromise in the next two days, the legally required “cooling-off” period before Deri’s resignation takes effect, the government will lose its majority in the Knesset, the 120-seat Parliament, and remain in power only with the support of the Arab and pro-Communist parties.

“If the crisis lasts more than 48 hours, it will for sure have a negative impact on the peace talks,” said Health Minister Chaim Ramon from Rabin’s Labor Party. “We must bring an end to this crisis as soon as possible. . . .

“We need Shas in the government. A government that is shaky, whose majority is not certain, which is preoccupied with the problems of survival, is not the best government to deal with delicate issues like the peace process.”

Anticipating Deri’s resignation, Rabin warned last week that Shas’ pullout would bring the U.S.-brokered peace negotiations to an end. In the name of those talks, he sought a compromise Sunday between Shas and Meretz in the form of a broad Cabinet shuffle that would shift Aloni out of the sensitive Education Ministry without appearing to be a capitulation to Shas.

Rabin had declared at the outset of his government last July that he would not rely upon the votes of five Arab and Communist members of the Knesset to ratify peace agreements reached with the Arabs. He is now facing a serious challenge on the peace issue from the opposition Likud Party under its new leader, Benjamin Netanyahu, with a vote of confidence scheduled for today.

The politics of Deri’s resignation are extremely complex, however, because the 34-year-old rabbi is facing imminent indictment on corruption charges, and with his resignation he may be seeking to prove his value and that of Shas to the coalition.

“This crisis is much more serious than we originally thought, and I am not sure it can be solved during the 48 hours’ breathing space,” said Uzi Baram, the tourism minister and a skilled political tactician for the Labor Party. “Once it is out of the coalition, Shas will be hard to bring back.”

In a day of political drama and frantic negotiations, Rabin’s efforts were directed Sunday mainly at the Cabinet shuffle, in which Aloni would give up the Education Ministry and get another major post, but in a way that would not reward Shas. Ministers also talked of bringing another religious party into the coalition, broadening it or perhaps replacing the rebellious Shas.

Yaacov Tsur, the agriculture minister and a Rabin confidant, said the prime minister hoped to get through the political crisis, the most serious his government has faced since assuming power last July, through such a shuffle.

“This has to be done with the minimum damage to people’s prestige and the minimum damage to the work and operation of the government,” Tsur said. “It must not turn into musical chairs.”

Communications and Police Minister Moshe Shahal, like Tsur from the Labor Party, was optimistic. “This crisis has a solution,” he said. “It’s like a suspense movie--we know the beginning, we know the ending, we just don’t know the middle parts.”

But Environment Minister Yossi Sarid, another Meretz leader, said he thought Rabin’s effort at keeping Shas in the coalition would prove futile. “In my opinion, a solution will not be forthcoming,” Sarid said after a Meretz caucus. “We oppose the removal of Mrs. Aloni from her post and any personnel changes in the government.”

Aloni, 64, a longtime civil rights campaigner, has riled Israel’s religious Establishment in recent months by criticizing bans against civil marriages and public transportation on the Sabbath. She has described Israel’s chief rabbis as “two popes,” objected to the imposition of Jewish dietary laws on the country and questioned the use of a Jewish prayer at public ceremonies.

Shas leaders argue that Aloni is using her powers as education minister to push the country’s youth toward secularism, though the majority of Israel’s Jews, in fact, do not describe themselves as religious.

Aloni described the campaign against her as a “disgusting maneuver,” “mudslinging” and “blatantly sexist,” and she gave no ground Sunday, declaring that Deri’s letter of resignation was “full of lies about things I did not say.”

“Tolerance does not mean that the liberal side has no opinion and has to flatter their egos and praise these fundamentalists and extremists so that we can all live together,” Aloni told a meeting of her supporters Sunday evening. “Tolerance and pluralism mean that any person has the right to state his or her opinions fully.”

Over the weekend, members of the Haredi Orthodox community portrayed Aloni’s departure as a virtual certainty, putting up dozens of posters resembling death notices in religious neighborhoods of Jerusalem and Tel Aviv. Reflecting the ill feeling, the notices called Aloni an enemy of the Jewish religion and were signed “Joyfully, the adherents of religion.”

Researcher Dainna M. Cahn of The Times’ Jerusalem Bureau contributed to this story.