Sharon now faces a choice between calling early elections, or trying to struggle on with the support of the hard right, which would give him a tiny majority.

An alliance with the hard right would be bad news for the little that is left of the peace process — they are even more opposed to compromise with the Palestinians than Sharon. There could be months of uncertainty ahead.

A succession of ministers from the left-wing Labour party handed their resignations in to Sharon yesterday, including the party leader, Defense Minister Binyamin Ben-Eliezer, and Foreign Minister Shimon Peres, one of the architects of the all-but-defunct Oslo peace accords.

By all accounts Peres left with regret. It was Ben-Eliezer who insisted on leading his party out of government, after three hours of crisis talks. Shouting was heard coming from the room where he was meeting with Sharon, and at one point the Labour leader stormed out in rage.

At first sight, the dispute which prompted Ben-Eliezer to quit the government, a disagreement over the spending of some 700 million shekels ($150 million) in the budget, seems slight. Sharon even mocked him for it yesterday in a speech to the Knesset, saying: "For this you are breaking up the national unity government. Enough, there is a limit to contempt".

Finance Minister Sylvan Shalom, from Sharon’s Likud party, blamed Ben Eliezer for sabotaging a compromise which the two parties were on the verge of clinching. "There was an agreement. It was accepted by the foreign minister, Mr. Shimon Peres, and his colleagues, but unfortunately, the leader of the Labour party, the defense minister, didn’t accept it. He submitted his resignation," said Shalom.

But Ben Eliezer shot back on the floor of the Parliament: "We were always against the budget and yet we did the impossible trying to reach a compromise."

But what tore Sharon’s government apart yesterday were the Jewish settlements in the occupied territories, a vexed subject that goes to the heart of the political divide in Israel — it was to the settlements that the disputed 700m shekels of state funding were to go.

Ben-Eliezer objected to the money going to the settlements in a budget that was cutting state funding elsewhere, to pay the increasing costs of fighting the intifada. He was demanding the money be diverted to the elderly and university students.

But Sharon’s supporters accused Ben-Eliezer of breaking up the government for purely political reasons, because he is behind in the polls for the Labour leadership election, due in some three weeks. His rivals oppose staying in the government, and attacking the settlers will play well with Labour’s core constituency.

The settlements in the West Bank and Gaza Strip are illegal under international law, because they are built on occupied land. Palestinians say they are one of the biggest obstacles to peace, because they are built on the 22 percent of mandated Palestine which is left to them. The settlers say that all the land, both in Israel and in the occupied territories, was given to them by God.

Sharon is a keen supporter of the settlements. But the depth of resentment toward the settlers among left-wing Israelis is hard to overstate. Settlers get generous tax breaks and housing grants that are unavailable to ordinary Israelis. Many settlers refuse to serve in the army for religious reasons. The settlements are front-line targets for Palestinians and Israeli conscripts have to risk their lives to defend them.

Sharon must now decide whether to ask the president for early elections. If he does, they will have to be held within 90 days. The polls indicate Sharon’s Likud party would come out on top, but first he will have to face his own leadership contest, against former Prime Minister Benjamin Netanyahu.

Sharon told the Knesset yesterday that he would continue to "lead the state responsibly". Ironically, the fateful budget passed, despite Labour’s exit from the government, with support from other parties.

On Tuesday night, two girls and a woman were killed by a Palestinian who infiltrated the settlement of Hermesh in the northern West Bank and was later shot dead.

The Palestinian crept into the settlement and opened fire on two girls who were sitting outside their house. Both died of their wounds. The attack was claimed by the Al Aqsa Martyrs Brigades, an armed offshoot of the Fatah movement. The Brigades identified the Palestinian as Tareq Abu Safaka, a 22-year-old from Tulkarm.

A woman who heard the shooting came out of her house and fired at the Palestinian with a pistol, but he got away and entered another house where he shot at a couple, killing the woman and wounding her husband. Settlers and soldiers who arrived on the scene shot the man who was armed with an automatic weapon, Israeli military sources said. (The Independent)

SYDNEY, 31 October — Heavily armed Australian federal agents raided homes of Indonesian Muslims yesterday in a nationwide hunt for members of an Islamic radical group held responsible for the Oct. 12 bombing in Bali.

Police and intelligence agents armed with submachine guns and wearing helmets, flak-jackets and masks smashed their way into two homes in pre-dawn raids in the Perth suburb of Thornlie in Western Australia.

At the same time agents in Sydney arrested a 31-year-old man on visa offenses during the search of a home belonging to another Indonesian, Ali Basri, whose son Jaya was targeted by a similar raid on Sunday. Officials also confirmed two other homes were raided at the weekend by members of the Australian Security Intelligence Organization and federal police in a hunt for agents of the Indonesian group Jemaah Islamiah.

Attorney General Daryl Williams said the operations were "part of a wider and ongoing investigation into the possible presence of Jemaah Islamiah in Australia".

But neighbors of the targeted homes, civil libertarians and Muslim community leaders questioned the level of force used in the raids. "The federal police hit the fence in the front, hit the security door and...broke the door in the side to go through to the back yard as well," said Jan Herbert, whose home was one of the two raided in Perth.

Muslim community leaders said Basri had no links to the Islamic group apart from the fact that he had listened to a sermon by its suspected leader, Abu Bakar Bashir, at a mosque in Sydney in 1997.

The Air Force B2 Bomber Wing, began practicing Tuesday for the deployment to the British Indian Ocean island of Diego Garcia and an air base at Fairford, England, said Col. Doug Raaberg, commander of the 509 Bomb Wing. He did not say how many of the $1.1 billion jets would be sent, but told reporters: "We will go when the president and the secretary of defense tasks us to do that."

The B-2s would take the lead in any campaign to disarm Iraqi military defenses and knock out its communications. "We will move this to a forward location so we can cycle these aircraft as rapidly as necessary," said the bomb wing commander. Raaberg said work was under way to install five special climate controlled shelters for B-2s at Diego Garcia and Fairford. He said it takes 30 days to put up one of the $1.5 million shelters.

Putting just two B-2s closer to the Gulf will enable US forces to fly 12 stealth bomber missions for every one that could be flown from Whiteman Air Force Base in the US Midwest, the military said.

Yesterday, US and British warplanes attacked Iraqi anti-aircraft units. An Iraqi official insisted the planes had bombed civilian targets. Western military authorities say their planes have attacked air defenses in the two no-fly zones over north and south Iraq 53 times this year.

Chief UN arms inspector Hans Blix, who has questioned some US proposals, met US President George W. Bush. Blix made the rounds at the White House, meeting Bush for 10 minutes, as well as Vice President Dick Cheney and national security adviser Condoleezza Rice.

Separately, US officials said the administration was building cases against Iraqi President Saddam Hussein and key members of his inner circle with an eye toward charging them with crimes against humanity in the event the Iraqi government is toppled and Saddam survives.

"If Saddam Hussein’s regime collapses and he survives, of course the world will want to bring him to justice," said a senior administration official. "He shouldn’t expect to receive a pardon." The United States accuses Saddam and his inner circle, including sons Uday and Qusay, of a history of brutal repression and atrocities.

Bush talked to Blix about the importance of "protecting the peace and making certain that Saddam Hussein disarms," said White House spokesman Ari Fleischer.

Blix has hinted the United States should modify certain provisions in a draft resolution. One is a demand for an exhaustive list of weapons and related materials within 30 days. Blix said Monday the deadline might be too short for Iraq to account for its large civilian chemical programs, particularly materials used in its oil industry.

Bush spokesman Fleischer also said the United States has no interest in controlling Iraq’s vast oil reserves if the administration decides to take military action in Iraq.

"The proposed project will help to build an intellectual bridge between Austria and the Arab world on the one hand and between Arab countries and Europe on the other," said Marieliese Schack, director of the Institute for Restoration at the ANL. "We are awaiting response from the Saudis about how they want to be involved in this restoration and research project," Schack added. The invitation to participate in the preservation of the Glaser Collection — the name by which the manuscripts are known — was extended to the Saudis last year during the visit of Austrian President Dr. Thomas Klestil to the Kingdom.

Schack said that after restoration, the aim is to store the manuscripts in a purpose-built and climate-controlled environment. The manuscripts would then be accessible to selected researchers and scholars. The library itself would offer financial support to the project as it has funds available for such a purpose.

The ANL has some 6.9 million collections including 2.9 million books, 190,000 rare manuscripts, graphics and posters in addition to having the second largest collection of rare globes in the world.

Schack said the library plans to bring its catalog online in 2005 so that researchers anywhere in the world may have access. She said that a part of the necessary funding has been made by a generous contribution from Prince Hassan of Jordan.

The collection also includes 30 editions of the Holy Qur’an, 14 books of the sayings of Prophet Muhammad, peace be upon him, 35 major titles on legal and religious subjects, over 75 religious documents dealing with different topics, 19 rare historical documents, 30 titles of poetry and 20 documents on morality, behavior and codes of conduct. The value of the manuscripts lies in the discovery of new information which will result from an intensive study of them. Shack said the manuscripts had been collected by an Austrian explorer, Eduard Glaser, in the Arabian Peninsula. The manuscripts serve as a source for research into the art of book bindings and paper production in southern Arabia. The library has assigned an expert to begin restoration while awaiting the Saudi response to the invitation.