Netanyahu's Gaza shock hits Israeli stock market

Benjamin Netanyahu has assumed the mantle of leadership of opposition to Israel’s pullout from the Gaza Strip by resigning as finance minister as the Cabinet was about to vote on it – but he admitted he can’t stop the withdrawal, set to begin next week.

Netanyahu, a hard-liner and former prime minister with ambitions to reclaim the top job, said he resigned because he fears the pullout will turn Gaza into a “base of Islamic terror” and endanger Israel. Though he couldn’t stop it, he said, he wanted no official part of it.

In an immediate response, Israel’s stock market dropped 5% within an hour. Netanyahu had adopted a pro-business economic policy and cut welfare benefits in more than two years as inance minister.

Prime Minister Ariel Sharon, trying to limit damage to the economy, announced he would stick to that approach. He picked his confidant, Vice Premier Ehud Olmert, as interim finance minister in a show of continuity.

The resignation could force early elections; for now, the vote is set for November 2006. Netanyahu enjoys strong support in the ruling Likud Party, which largely opposes the pullout, and could try to wrest the Likud leadership from Sharon in coming months as a step toward running for prime minister.

Netanyahu, 55, dropped his political bombshell as the Cabinet debated removal of three isolated Gaza settlements – Kfar Darom, Morag and Netzarim. He put a note with his negative vote and a resignation letter in front of Sharon and left.

“It was very dramatic in there,” said Cabinet minister Matan Vilnai from the Labour party. Vilnai said Sharon did not react.

Shortly after Netanyahu’s exit, the ministers voted 17-5 to approve the dismantling of the three settlements. In all, about 9,000 settlers will be removed from their homes in 25 settlements – 21 in Gaza and four in the northern West Bank – starting on August 15.

The vote was largely a formality, since the government has repeatedly approved the overall withdrawal.

Netanyahu later told a news conference he was conflicted because he had hoped to continue what he described as ”historic” economic reforms, but could not lend his support to the pullout plan. “I cannot stop this (the pullout), but I can be at peace with myself. I can say that I cannot be a party to this,” he said.

Netanyahu has a well-known flair for the dramatic. Speaking native American English, he became Israel’s main foreign policy spokesman in the 1990s and has a large following in the US. He once did a live TV interview wearing a gas mask against a possible Iraqi chemical attack.

He became prime minister in 1999, and though he was voted out of office just three years later, he remains a favourite of hard-line Israelis, especially those who feel betrayed by Sharon’s about face after decades of pushing settlement expansion.

Jewish settler leaders had long hoped the charismatic Netanyahu would quit the government and lead their struggle against the Gaza pullout. They praised Netanyahu’s decision, but Eran Sternberg, spokesman for the Gaza settlers, said it came “far too late."