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 The comments by Ehud Barak increased the growing pressure on Olmert to resign in the wake of a U.S. businessman's court testimony that painted Olmert as a money-hungry politician with a love for luxury.
Olmert has denied any wrongdoing and said he would resign only if he is indicted.
At a news conference, Barak said that in light of the criminal investigation, he did not think Olmert could focus on peace efforts and the country's pressing security needs.
"I don't think the prime minister can at the same time lead the government and handle his own affairs. Therefore, acting out of concern for the good of the country ... I believe the prime minister must disconnect himself from the day-to-day running of the government," he said.
There was no immediate reaction from Olmert. But earlier Wednesday, Olmert aide Tal Zilberstein said the prime minister "doesn't have any intention to resign or to step down temporarily, even if Barak asks him to."
Olmert's spokesman, Mark Regev, said the prime minister was continuing his daily schedule. "It's business as usual," Regev said.
Barak said Olmert could suspend himself, resign or even go on vacation. He promised to cooperate with a new leader from Olmert's Kadima Party, but vowed to force new elections if Olmert doesn't step aside.
"If Kadima doesn't act and this parliament doesn't see another government that is to our liking, we will act to set an agreed-upon date for early elections," he said. He said the date would be "soon."
Although Barak stopped short of setting a firm deadline, his comments made it extremely difficult for Olmert to stay in power. If Labor withdraws from the coalition, Olmert would lose his parliamentary majority and the country would be forced to hold new elections.
Israel's popular foreign minister, Tzipi Livni, would become caretaker prime minister if Olmert stepped down. The party then could try to form a new government, and if that effort failed elections would likely ensue.
Livni and other Kadima leaders have remained silent since Tuesday's damaging court testimony, although one junior Kadima lawmaker, Amira Dotan, urged Olmert to resign. Israeli media reported that several ministers already were positioning themselves to replace Olmert.
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 Yuval Steinitz, a member of the hardline opposition Likud Party, criticized Barak for not setting a firm deadline. He accused Barak of trying to "earn time ... rather than doing the rational thing" and call for immediate elections.
Israeli prosecutors are investigating tens of thousands of dollars in donations collected by Olmert before becoming prime minister in 2006. They suspect he may have violated campaign finance laws or accepted bribes.
On Tuesday, the key witness in the case, U.S. businessman Morris Talansky, testified that he personally gave Olmert $150,000 over 15 years, often in cash-stuffed envelopes.
Talansky said he gave Olmert money beginning in 1991. Olmert became Jerusalem mayor in 1993, serving for a decade at the end of which he was named ministry of industry and trade.
Talansky, 75, said he did not get anything in return for the money. Instead, he said he overlooked questions about Olmert's request for cash due to his admiration for Olmert and his belief in Olmert's ability to unite the Jewish people. Olmert's lawyers are scheduled to cross-examine Talansky on July 17.
Talansky's testimony is the latest blow to Olmert, who has been deeply unpopular since Israel's inconclusive war against Hezbollah guerrillas in Lebanon in 2006.
Olmert has set a year-end target for reaching a peace deal with the Palestinians. Last week, he also announced the resumption of peace talks with Syria after an eight-year break. Now, both peace efforts are in jeopardy.
Palestinian negotiator Saeb Erekat dismissed the crisis as an "internal Israeli matter" and said the Palestinians "hope this will not impact the ongoing negotiations."
[Associated
Press; By JOSEF FEDERMAN]
Copyright 2008 The Associated
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