Call for Israel PM to stand down

Mr Olmert has previously said he will not step down

Israeli Defence Minister Ehud Barak has called on Prime Minister Ehud Olmert to take a leave of absence or resign as he battles allegations of corruption.

Mr Barak said he would take his Labor Party out of Mr Olmert's governing coalition if he did not step down.

"The prime minister needs to disconnect himself from the day-to-day management of the government," Mr Barak said.

Mr Olmert denies claims that he took up to $500,000 (£250,000) in bribes or illegal campaign donations.

Mr Olmert, the head of the Kadima Party, says the sums were legal campaign contributions.

He has previously said he had no plans to step aside unless he is charged.

Kadima has just 29 MPs out of a total of 120 seats in the Knesset, and relies on the Labor Party's 19 MPs as key allies in its governing coalition.

'Early elections'

Mr Barak was speaking a day after the US businessman at the centre of the allegations told investigators that he gave Mr Olmert envelopes full of cash.

ISRAELI KNESSET Kadima: 29 MPs Labor: 19 MPs Shas: 12 MPs Likud: 12 MPs Yisrael Beiteinu: 11 MPs Others: 37 MPs

Morris Talansky was questioned by investigators, and is due to be cross-examined by Mr Olmert's defence team in July.

At a press conference on Wednesday, Mr Barak said he did not think the prime minister could run the government and deal with the fall-out from the allegations at the same time.

"He can do this in any of the ways open to him - suspension, vacation or resignation or declaring himself incapacitated. We will not be the ones to determine this," he said.

But he warned that if he did not leave, "we will act towards setting an agreed and early date for elections".

'Loved cigars'

Testifying in an Israeli court on Tuesday, Mr Talansky said he handed over about $150,000 (£76,000) of his own money to Mr Olmert, directly and through aides, over a 15-year period.

Mr Talansky said the money was often handed over in cash-stuffed envelopes

The rest of the money came from fundraising.

He said he did not know how the money had been spent, adding: "I only know he loved expensive cigars. I know he loved pens, watches."

Mr Talansky said that Mr Olmert also asked him for a personal loan of $25,000-$30,000 for a holiday in Italy.

In another case, he said, he walked to a bank to withdraw $15,000 in cash for a loan as Mr Olmert waited in a luxury hotel.

Mr Talansky said he thought Mr Olmert's "word was gold", but that Mr Olmert never repaid either loan.