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Sharon Government Suffers Setback

Israeli Prime Minister Ariel Sharon has lost a crucial budget vote in parliament which could topple his government, while a Palestinian militant leader says he will run for president, possibly upsetting an election set for early January to choose Yasser Arafat's successor.

As widely expected, Israel's parliament, the Knesset, handed Prime Minister Sharon a resounding defeat on the first reading of his budget for 2005.

The vote was 69 to 43 against the prime minister. It is seen as a vote against Mr. Sharon's policy of trying to keep together a fragile coalition. It goes to the heart of his plans to withdraw Israeli troops and settlers from the Gaza Strip beginning next year.

Immediately after the vote, Mr. Sharon sacked the ministers from his coalition partner Shinui party, who made good on their threat to vote against the bill. They objected to the prime minister's decision to increase funding to smaller religious parties in return for their support.

This leaves Mr. Sharon with a coalition of just 40 votes out of 120 Knesset members and far short of the 61 votes needed for a majority.

Mr. Sharon has been governing with a minority coalition for some months due to defections over his controversial Gaza withdrawal plan. But during that time, the opposition Labor party has provided him with a parliamentary safety net by voting with his Likud Party in the Knesset. But, Labor withdrew that net over the budget issue and a report issued last week showing a rise in poverty rates, blamed largely on the government's policies.

It all came to a head Wednesday night. Mr. Sharon will either have to look for a new coalition, possibly with the opposition Labor Party or call for early elections.

And to add to the political complications in the region the jailed, popular Palestinian militant leader Marwan Barghouti has said he will stand for election in the January 9 vote to choose a successor to Yasser Arafat. His wife Fadwa told journalists in Ramallah that, on her husband's orders, she has filed papers placing his name on the candidates' list for the presidency of the Palestinian Authority just hours before the midnight deadline.

Mr. Barghouti, who is serving five consecutive life sentences in an Israeli jail for involvement in terrorism, had previously said he would not run and had thrown his support behind front-runner Mahmoud Abbas. But, his surprise decision late Wednesday could throw the upcoming Palestinian elections into disarray and could have a serious impact on possible resumption of peace talks between the Palestinians and Israelis. Israel has indicated a willingness to deal with Mr. Abbas, but considers Mr. Barghouti a terrorist.