JERUSALEM, Jan. 5 (JTA) — The Israeli government may be down, but Prime Minister Benjamin Netanyahu insists his coalition is far from out. “The coalition will hold,”” Netanyahu predicted defiantly on Sunday, just hours after Foreign Minister David Levy resigned. The prime minister brushed aside near-universal predictions among Israel”s political commentators that the departure of Levy and his Gesher faction — which leaves Netanyahu with a thin 61-59 majority in the Knesset — was the beginning of the end for his 19-month-old government. Indeed, his government survived its first test a day later, when the Knesset approved the 1998 state budget by a vote of 58-52. But Netanyahu faces yet another major hurdle as he turns his attention — and seeks Cabinet support — for a new round of peace diplomacy aimed at achieving a further Israeli redeployment on the West Bank. U.S. Middle East envoy Dennis Ross was expected in Israel this week for talks in advance of Netanyahu”s meeting with President Clinton in Washington on Jan. 20. Clinton is also scheduled to meet that week with Palestinian Authority Chairman Yasser Arafat. In the coming weeks, Netanyahu will not only be fighting for the survival of his rightist-religious coalition. He also will be battling for his own survival as the leader of the Likud Party and as its candidate for prime minister in the next election — whenever that is held. Underscoring Netanyahu”s difficult position in his own party was an acrimonious meeting of Likud ministers and Knesset members on the eve of the crucial budget vote. Speaker after speaker voiced the widespread resentment felt in the party over the premier”s handling of the intricate coalition negotiations surrounding the annual budget bill. Netanyahu was mired last week in negotiations with rebellious coalition members who pressed successfully for funding of special interests. Netanyahu put off a scheduled vote in the Knesset on the budget last week in the hope of securing support from Levy and his faction. As a result, the government missed a Dec. 31 deadline to pass the budget, though by law it receives a three-month extension. By leaving Levy and his five-seat faction out in the cold until the budget was all but wrapped up, Netanyahu and Finance Minister Ya”akov Ne”eman created a crisis that could have been avoided, the premier”s critics argued. After Levy threatened to resign late last week, Netanyahu and Ne”eman promised to provide funds for programs for Levy”s low- income constituency. But in announcing his resignation, Levy said he had rejected the pledge for additional social spending because it had come too late. Levy said he was resigning because of the government”s “insensitive”” social policy and its handling of peace negotiations. He warned that “stonewalling”” by the government could backfire to a point where a settlement with the Palestinians would be imposed upon Israel. “There comes a time when one must stand up and make a clear, unequivocal statement,”” Levy said. “I am fed up, and no longer consider myself part of this government.”” In the end, Levy”s Gesher faction voted against the $57.5 billion budget. Likud Knesset member Ze”ev “Benny”” Begin, one of Netanyahu”s most strident critics, abstained. Many key Likud figures see Netanyahu”s performance on the budget as yet another in a series of decision-making mishaps that have dogged his premiership, reflecting both on his character and on his leadership qualities. Levy”s remarks merely articulated publicly what many other ministers, including Likud ministers, have been muttering privately for months. His departure may bring that widely felt dissent to the surface — further weakening Netanyahu”s present position and future prospects. But Netanyahu and his political allies contend that the very fragility of the coalition will enhance unity and discipline among the remaining partners. “Some mistakes have been made,”” Netanyahu was quoted as telling coalition members before Monday”s budget vote, “but none as serious as in 1992, by allowing the left-wing camp to rise to power.”” Netanyahu pointed out that previous Israeli governments had operated with only a one-vote majority in the Knesset and that he was confident his coalition would continue at least through 2000, the scheduled date for the next national elections. Members of the premier”s circle reason that the seven parties comprising the coalition do not want elections now because few Knesset members want to risk losing their seats. A source close to Avigdor Kahalani said the Third Way Party, with its four seats, would not bolt the government. At the same time, however, 17 coalition Knesset members, who make up the Land of Israel group, say they are committed to bringing down Netanyahu”s government if he goes ahead with any redeployment, regardless of its dimensions. Many political commentators believe that the redeployment will be Netanyahu”s undoing. The departure of Levy, considered a moderate on matter related to peace negotiations with the Palestinians, gives further influence to the hard-liners in Netanyahu”s coalition who are opposed to any further territorial concessions in the West Bank, much less the “credible”” pullback American and Palestinians officials have been pressing Israel to implement. Netanyahu said this week he would not go to Washington without a decision in the Cabinet on the guidelines he would present to the Americans. Netanyahu has denied reports that he pledged to carry out a double-digit pullback, somewhere between 10 and 15 percent. For its part, the Clinton administration said regardless of the changes in the Israeli government, it still sees the same “urgency”” in moving forward on the peace front. The need for progress is “not based on the particular makeup of a particular government at a particular time,”” State Department spokesman James Rubin said this week. Netanyahu, meanwhile, is counting on the opposition parties — Labor and Meretz — to supply the votes he will need to push a redeployment plan through the Knesset. Netanyahu also apparently believes that coalition hard-liners will ultimately think twice before pulling the plug on his government and risking a Labor victory in an early election. Netanyahu warned Sunday at his news conference that a Labor government would return Israel to its pre-1967 borders and would divide Jerusalem — a message clearly directed at the nationalist camp. Until Levy”s resignation, Netanyahu”s first presumption seemed fairly safe. Labor leader Ehud Barak had indicated in the past that if the redeployment were considered substantial, his party would support it. But now there is a growing number of Laborites who oppose backing Netanyahu on redeployment. After all, they say, if the longtime Likud stalwart Levy faulted Netanyahu for thwarting peace prospects, why should Labor support the Likud premier? But the prime minister”s greatest peril may come from his own camp and his future status as leader of the party. Levy”s departure has thrown the spotlight on Yitzhak Mordechai, the popular defense minister and the man who, according to the polls, would give Barak a far closer race than the battered Netanyahu. If those polls persist — and begin affecting Likud rank-and-file opinion — Netanyahu could face an uphill struggle to retain control of the party. Even before that stage, Netanyahu could find himself assailed by disgruntled forces on his own side, who could use a provision of the new election law to bring down the prime minister. That provision, which has never been tested, enables a majority of 80 or more lawmakers to remove a prime minister without triggering new Knesset elections. Only a new election for premier would be called. This provision was probably originally intended to replace a dysfunctional or malfeasant prime minister. But in this period of political uncertainty, politicians may seize every available weapon to defeat their opponents.