Moderate Challenges Israel's Netanyahu

Tel Aviv Mayor Roni Milo, a rebel in Prime Minister Benjamin Netanyahu's Likud party with moderate views on making peace with Arabs, challenged Mr. Netanyahu yesterday for Israel's leadership.

His bombshell announcement stole the spotlight from Netanyahu while the prime minister was at talks in London facing United States and Palestinian pressure to break a 13-month-old deadlock in the peace process with Palestinians.

"I intend to establish ... a centrist party, a party that will compete in the coming elections, whenever they will be, for the prime ministership," Mayor Milo told a hastily called news conference in Tel Aviv. He said he would complete his five-year term as mayor in November, quit Likud, and form a party with a goal of patching the divisions in Israeli society, such as between religious and secular Jews.

A Tel Aviv-born lawyer, Milo has been seen as one of the young Likud princes since he served as police minister under Prime Minister Yitzhak Shamir until 1992. He was elected Tel Aviv mayor in 1993. He broke ranks with Likud in 1996 to back talks with the Palestine Liberation Organization. Last November, he helped lead a failed revolt aimed at snatching Likud from Netanyahu's control.

National elections aren't scheduled until 2000. For now, Milo's candidacy turns the contest for prime minister into a three-way race with Netanyahu and Labor Party leader Ehud Barak.

"I also believe that we should make more effort to go forward in the peace process and having changes in the Israeli society dealing with unemployment," he said. Unemployment is 7.6 percent.

Milo has yet to put to a nationwide test his opposition to what he calls coercion by religious Jews. "My aim is to neutralize the leverage of religious extremists, which is used today by a group which is not large but enjoys great political power," he said.

The battle last week over a dance performance at Israel's 50th anniversary celebration was a "crisis point" for Israel, Milo said. The Batsheva dance troupe pulled out to protest demands by religious Jews that it change a segment in which dancers strip to their underwear. Orthodox Jews said the routine was offensive. The vast majority of Israel's Jews are not Orthodox, but the small Orthodox political parties exercise extraordinary power.

"The centrist party I'm forming is meant to change the political structure in the state of Israel ... to bring about a situation whereby the religious extremist parties will no longer enjoy the balance of power on the Israeli political map," Milo said.