Israel's right-wing Likud leader Benjamin Netanyahu responded on Thursday to Ehud Olmert's decision to resign as prime minister by calling for new elections, a move that could paralyse Middle East peace talks.

Recent opinion polls suggest Netanyahu's Likud party, a leading critic of Olmert's peace moves with the Palestinians and Syria, would win a snap parliamentary election.

Olmert, dogged by corruption scandals, announced on Wednesday that he would bow out of his centrist Kadima party's September 17 leadership contest and then step down.

It may take his successor months to cobble together a new coalition, meaning Olmert could remain in power as interim prime minister, possibly until next year if new elections are called.

"This government has reached an end and it doesn't matter who heads Kadima. They are all partners in this government's total failure," Netanyahu told Israeli Radio.

"National responsibility requires a return to the people and new elections."

Netanyahu was not alone in predicting new elections that could throw Israeli politics into turmoil for months.

Vice Premier Haim Ramon, a Kadima party leader and Olmert confidant, said he believed new elections were a "high" probability because Olmert's successor would find it difficult to form a new government.

One day after Olmert's announcement, Israel's largest circulation newspaper, Yedioth Ahronoth, featured the prime minister's back on the cover under the banner headline, "The Right Step". Maariv declared: "Olmert's Era, the End".

Netanyahu could try to shortcut Kadima's plans to form the next Israeli government by mustering a majority in parliament, either to form his own coalition or to move up elections currently scheduled for 2010.

The White House said its goal of getting Olmert and Palestinian President Mahmoud Abbas to reach a peace deal this year was unchanged.

Olmert has vowed not to "ease up" on peacemaking until his last day in office, but analysts doubt he will have the political strength to make commitments, either in final-status talks with Abbas or indirect negotiations with Syria.

Four Kadima ministers, including Foreign Minister Tzipi Livni and Transport Minister Shaul Mofaz, have launched campaigns to replace Olmert in the September 17 vote.

Polls have shown Livni, Israel's chief negotiator with the Palestinians, ahead within Kadima.

POLITICAL UNCERTAINTY

Olmert has faced weeks of public pressure to resign over probes into suspicions he took bribes from an American businessman. Olmert has denied any wrongdoing, and vowed on Wednesday to prove his innocence.

Olmert's successor as Kadima party leader would not automatically take over as prime minister because under Israeli law the current government would be dissolved and the new leader must form a new coalition before taking over.

Defence Minister Ehud Barak, head of the left-of-centre Labour Party and Olmert's largest coalition partner, said he believed Kadima could form a new government without going to elections as called for by Netanyahu.

Barak's Labour lags behind Likud in opinion polls.

Mofaz, a former defence chief known for his tough tactics in crushing a Palestinian uprising, said new elections should be avoided and vowed to form a national unity government if he becomes Kadima leader.

One of the most right-wing Kadima members, Mofaz could try to form a new coalition with Netanyahu, a former premier.