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A key partner in Israel’s coalition government announced his withdrawal over peace negotiations with the Palestinians.

Avigdor Lieberman said Wednesday he was taking his right-wing Yisrael Beiteinu faction out of the government in light of Prime Minister Ehud Olmert’s decision to negotiate with the Palestinian Authority on “core” peacemaking issues such as the future status of Jerusalem and West Bank land handovers.

Yisrael Beiteinu argues that the Jewish state should annex West Bank settlement blocs while ceding Israeli Arab communities to the jurisdiction of a future Palestine. To do otherwise, Lieberman said, would be to encourage pro-Palestinian irredentism within Israel.

“It’s not that we’re against the solution of two states for two peoples,” Lieberman, who has served as Olmert’s strategic affairs minister, told reporters. “On the contrary, we support it — two states for two peoples, not a state and a half for one people and half a state for the other.”

Lieberman’s walkout, which takes effect Friday, will not immediately topple the government since Olmert’s coalition will still command 67 of the Knesset’s 120 seats.

But it might precipitate similar action by Shas, another right-wing party. That would potentially force Olmert to seek left-wing replacements at a time when he needs to persuade Israeli hard-liners that he is tough enough to deal with Palestinian security threats.

Olmert responded to Lieberman’s decision to step down by thanking him for his service in government.

“The prime minister is determined to continue with the diplomatic negotiations out of recognition that they contain the only real chance of ensuring the peace and security of Israel’s citizens,” Olmert’s office said in a statement.

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