Sharon facing an uncertain future

ISRAELI Prime Minister Ariel Sharon dismissed as "despicable libel" allegations about his involvement in a financial scandal that has cast a shadow over the upcoming Israeli election.

"I came here tonight to respond to the despicable libel that has been made against me with one purpose, to bring down the government in Israel and to seize power through lies," Mr Sharon told a nationally-televised media conference yesterday.

Mr Sharon attacked the opposition Labour Party, accusing it of being behind allegations of corruption in his ruling Likud Party.

"I never imagined that the behaviour of the Labour Party would be so irresponsible," he said. "They tried to turn all of us into the Mafia, into organised crime, and all for the sake of politics."

On Tuesday, the Haaretz newspaper printed a leaked Justice Ministry document indicating police were investigating Mr Sharon and his sons in connection with a $1.5 million loan they received a year ago from a South Africa-based businessman, allegedly to cover payback of illegal campaign funds from a previous election. Israel's attorney general confirmed that a police inquiry is under way, saying South Africa has been asked to arrange a deposition from the businessman who provided the funds.

The scandal has turned Israel's election campaign into an open race after opinion polls showed support for his front-running Likud party plummeting. In a further blow to the Israeli right, the Supreme Court overturned a ban on two prominent Arab candidates for parliament in the January 28 election, a move that could bring more Arab voters, who normally identify with leftists, to the ballot box.

An aide to Mr Sharon said the prime minister would show documents refuting allegations of wrongdoing over a $1.5m from businessman Cyril Kern.

"Whoever is disseminating this libel ... has one single aim to bring down the prime minister," Mr Sharon said.

The scandal has fired up a lacklustre campaign in the run-up to voting in which opinion polls had originally forecast the right-wing Likud would crush its main opponent, the centre-left Labour Party led by dovish Haifa mayor Amram Mitzna.

A new poll in the left-wing Ha'aretz newspaper found Likud would win only 27 seats in the 120-member parliament, a drop from 31 predicted in a survey last week and down from 41 estimated in early December.

Separate polls in the Maariv and Yedioth Ahronoth newspapers found Likud taking 30 and 28 seats respectively. The three surveys were conducted after the loan scandal broke.

The polls indicated Mr Sharon could still form a right-wing coalition controlling 61 parliamentary the loan had been repaid in full with interest. seats.

But a narrow majority could lead Mr Sharon to seek a broader coalition including centrist and left-wing partners likely to push for a softer line toward the Palestinians, waging an uprising for statehood since September 2000.

The allegations against Mr Sharon focus on funding irregularities in his 1999 Likud election campaign and include accusations that he received a substantial loan from Mr Kern. Israeli law bans political funding from abroad.

The money, according to the reports, was put up as collateral for a loan used to cover the return of illegal campaign funds, which Mr Sharon had told police he paid back by taking out a mortgage on his ranch.

Mr Kern said the loan had been repaid in full with interest..