His announcement at the start of the weekly Cabinet meeting removed any immediate threat to the survival of Mr Olmert's government as it pursues its declared goal of signing a peace treaty with the Palestinians this year.

Mr Barak had said before joining the coalition in June that he would push for Mr Olmert's resignation or early elections after a war inquiry delivered its final report.

The report, delivered last Wednesday, left Mr Olmert relatively unscathed, but criticised the government and the army for 'serious failings and flaws'.

'Why am I staying? I'm staying in the post of defense minister because I know what kind of challenges face Israel - Gaza, Hezbollah, Syria, Iran, the rehabilitation of the military and the political process,' Mr Barak said.

If he were to have pulled Labour's 19-member faction out of the coalition, Mr Olmert would have been stripped of his parliamentary majority and likely forced to call an election. His coalition now controls 67 of parliament's 120 seats.

But with Labour trailing badly in public opinion polls, Mr Barak apparently decided his party's political fortunes - and his own - would be better served by remaining in the government.

He Barak hopes to reclaim the premiership he briefly held before losing it in early 2001, but polls would hand the race to hawkish opposition leader Benjamin Netanyahu of the hardline Likud Party.

Given the poll results, his decision to remain in government had been expected. -- AP