ISRAEL - May 4 - Olmert Defies Calls For Him To Quit.

Israeli PM Ehud Olmert, remains defiant and vows to stay in office in spite of a rally of 100,000 protesters urging him to quit because of his mishandling of last year's Lebanon war. Israelis from across the political spectrum gathered in Tel Aviv on May 3 night, united by their desire to see the man they call a discredited leader resign. However, the leftwing Peace Now movement criticised the rally for a lack of coherence, saying a likely winner if Olmert stepped down would be Benjamin Netanyahu, the hawkish leader of the opposition Likud party. Miri Eisen, Olmert's spokeswoman, said the best way to deal with the situation was "a stable government, not a transition period, and to immediately?... fix the mistakes and face the challenges". Amir Peretz, defence minister in the coalition government and Labour party leader, was reported as still considering his resignation after he and Olmert were slammed by a commission of inquiry's report into the first days of the conflict against Hizbullah. However, the Labour party's central committee is due to hold a meeting on May 13 to discuss calls to quit the coalition. The party will hold leadership primaries at the end of this month and Peretz is widely expected to lose. Frontrunners include former PM Ehud Barak, and a former security chief Ami Ayalon. If Olmert hangs on to power, the political turmoil could last until July, when the Winograd commission is expected to issue its final report. The recriminations could also overshadow US attempts to implement Israeli and Palestinian steps this year towards eventual peace talks. The US timeline recently sent to Israeli and Palestinian leaders would see Israel allowing Palestinians to travel between the Gaza Strip and West Bank and easing humanitarian conditions in the occupied territories, while the Palestinians would do more to tighten security on the Gaza-Egypt border and prevent the firing of rockets. Israel was reported on May 4 to be against parts of the proposals - intended to be implemented over the next eight months - but the Palestinians welcomed it. Many other obstacles lie ahead, including the continued western embargo against the Palestinian unity government that includes Hamas and Fatah. Mahmoud Abbas, Palestinian president and Fatah leader, was said to be considering his resignation if western sanctions were not lifted within two months.