There is political upheaval in Israel, amid speculation the prime minister may quit his own party and form a new one ahead of early elections.

Prime Minister Ariel Sharon presided over a meeting of his current Cabinet for what may be the last time.

The Knesset, Israel's parliament, is expected to approve a bill for early elections this week. The elections will probably take place in late March, but there is already high drama.

Amir Peretz

Mr. Sharon was forced to call early elections after his senior coalition partner, the dovish Labor Party, elected a new leader, Amir Peretz, who decided to leave the government. Labor's Central Committee approved the recommendation Sunday.

There is widespread speculation that Mr. Sharon is considering leaving his hawkish Likud party, to form a moderate, centrist party.

Ariel Sharon attends Likud Party meeting at Knesset      (file photo)

Mr. Sharon helped found the Likud 30 years ago, on a platform of Jewish settlement in all the Biblical land of Israel. But he split the party, when he decided to pull out of the Gaza Strip and dismantle 21 Jewish settlements there. Since the pullout last summer in August, Mr. Sharon has faced a rebellion by Likud hard-liners, who have been voting against his policies.

"I think he has a few good reason for leaving the Likud," said Likud activist Mitchell Barak. "I think, first and foremost, he doesn't really have an ability to govern with the current members of Knesset that are with him. He can't appoint ministers, he can't promote his agenda and he can't promote his vision."

But Mr. Barak says that would be a gamble.

"At the age of 77 is not the best time to be starting a new business or a new political party," he said.

The political upheaval in Israel is bad news for the peace process. As a lame duck prime minister, Mr. Sharon will not be able to make any bold gestures toward the Palestinians. And even though elections will probably take place on March 28, it will take at least two months after that to form a government and establish a strategy for peace.

Despite high hopes following Israel's Gaza pullout, it appears that the peace process will be in limbo for at least six months. The internationally-backed "road map" peace plan had called for a provisional Palestinian state by the end of this year.