Ehud Olmert, the Israeli Prime Minister, is under mounting pressure to quit after his own Foreign Minister called for party primaries to resolve the corruption scandal that is threatening both his leadership and the faltering peace process with the Palestinians.

Mr Olmert’s number two in the Kadima Party, Tzipi Livni, made a call for fresh internal elections after the beleaguered premier insisted he would not step down after a damning testimony by a US businessman, who said he gave him at least $150,000 in undisclosed donations before he became Israel’s leader.

Kadima officials said that the party will meet in within a week to decide whether primaries — which Ms Livni, who is also Deputy Prime Minister, is expected to do win — would be held.

Her calls followed a threat by the leader of the Labour Party, Kadima’s key coalition partner, to pull out of the Government and trigger new general elections if Mr Olmert did not absent himself from power while he defends himself against the latest accusations, the fourth time he has been investigated by fraud police.

Both parties wish to avoid that scenario, as it could put the right-wing Likud Party in power.

Ms Livni also challenged her boss last year when she called on him to quit over a damning report into Israel’s failure to crush Hezbollah after the Lebanese militia killed and kidnapped members of an Israeli army border patrol in summer 2006. Mr Olmert brazened out the leadership challenge and was later partially vindicated in an official inquiry into the war.

Tzahi Hanegbi, the head of Kadima's central committee, said that the party would hold its meeting to decide on whether to stage primaries after Mr Olmert returns from the United States at the end of next week.

Mr Olmert has denied accusations of bribery and promised to step down if indicted. Police sources said that the fraud squad was trying to wind up its business as quickly as possible, one way or the other, to avoid creating a lingering political crisis.

Israeli media reported that the other key witness in the case, Mr Olmert’s close associate Uri Messer, could be holding extremely damaging evidence against the Prime Minister but was trying to divulge as little as possible. According to the daily Haaretz newspaper, Mr Messer said Mr Olmert knew that he was keeping large sheaves of dollars from Morris Talansky, the US businessman, in his safe, and would hand them over when asked for funds. Mr Olmert denied knowing that the cash was in his former business partner’s care.

Israelis, already shocked by the resignation of former President Moshe Katsav over allegations of rape, have become deeply disillusioned with Mr Olmert, who has been investigated in a string of corruption scandals ranging from accusations of doling out favours to business associates and, in the latest case, receiving hundreds of thousands of dollars stuffed into envelopes.

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