New splits among Palestinians and Israelis deal blow to peace hopes

Tentative hopes for a revived peace process in the Israel-Palestinian conflict were plunged into disarray last night by the collapse of Ariel Sharon's parliamentary majority and the prospect of a divisive contest for the Palestinian presidency.

Tentative hopes for a revived peace process in the Israel-Palestinian conflict were plunged into disarray last night by the collapse of Ariel Sharon's parliamentary majority and the prospect of a divisive contest for the Palestinian presidency.

The jailed Fatah leader Marwan Barghouti has electrified the forthcoming election to succeed Yasser Arafat by deciding in an 11th-hour change of heart to run against the Palestine Liberation Organisation chairman Mahmoud Abbas. His about-turn came as a budget by Mr Sharon's government was voted down by 69 to 43 votes in a Knesset defeat which leaves the Israeli Prime Minister struggling to recast his coalition government against a background of relentless far right-wing opposition to his Gaza disengagement plan.

The dramatic developments pose a new threat to the Sharon strategy of Gaza withdrawal, on which the international community has been pinning its hopes of further progress ­ as well as to the smooth assumption of power by a Palestinian leader already committed to securing a ceasefire by all the militant factions.

Mr Sharon, who will now need the opposition Labour Party to join his coalition if he is to save his disengagement plan, immediately sacked four ministers of the aggressively secular Shinui party, which ensured defeat for his budget because it contained a $290m (£150m) handout to religious institutions.

Determined to prove to strongly anti-Labour dissidents in his own Likud party that the government ­ now a minority administration threatened with losing a confidence vote next Monday ­ faced a real crisis, Mr Sharon rejected attempts by Shinui to avert it by postponing last night's vote. The Likud central committee will now have to consider whether to back the admission of Labour or trigger the alternative threatened by Mr Sharon of a general election. One danger for Mr Sharon, however, is that Mr Barghouti's decision to run as an independent could harden still further Likud opposition to the disengagement plan.

His decision was said by associates last night to have been finalised during a visit by his wife, Fadwa, and close colleagues to the Beersheeva prison where he is serving five concurrent life sentences. Theunexpected move came only hours before the midnight deadline for nominations for the 9 January election closed.

Cheered on by a small crowd of supporters, Fadwa Barghouti lodged her husband's registration documents at the Palestinian election headquarters, saying: "I officially registered Marwan."

If sustained until polling day, the decision is a major challenge both to the authority of Mr Abbas, the PLO chairman, and to what would have been a clear run to the presidency. Mr Sharon's travails have arisen because he was constrained by fierce opposition by many within his own Likud party to a coalition with Labour.

The result, however, was the departure from the coalition of the Shinui party, an unequivocal supporter of disengagement from Gaza led by the Justice Minister, Tommy Lapid.

Mr Barghouti's entry into the Palestinian election contest is likely to make the four-year-old Palestinian uprising a central issue of what is likely to be a fiercely fought campaign. Although both Mr Abbas and Mr Barghouti were strong supporters of the Oslo accords ­ of which Mr Abbas was a key architect ­ Mr Barghouti has publicly defended the uprising, while Mr Abbas has been its fiercest critic among senior Palestinian leaders.

While Mr Barghouti is notably popular, especially among younger Palestinians, he faces the prospect that Fatah's election machine ­ and its financial resources ­ will be deployed against him. Even the so-called "young guard" of activists have shown signs of divisions on his candidacy. Hanni al-Hassan, a top Fatah official in the Gaza Strip, insisted last night: "Fatah is united. Its official candidate is Mr Abbas. How is he [Mr Barghouti] going to rule a nation while he is in the jail?"