Jerusalem  - In a dramatic announcement Wednesday, the leader of Prime Minister Ehud Olmert's largest coalition partner called on the premier to turn the reins of government over to another member of his Kadima party, or else face early elections.

The announcement by Defence Minister and Labour Party leader Ehud Barak comes a day after a key witness in a corruption investigation surrounding Olmert testified how he handed the premier 150,000 dollars in cash over a 15-year period.

"In the wake of the current situation and considering the challenges Israel faces, including Hamas, Hizbullah, Syria, Iran, the captive soldiers and the peace process, the prime minister cannot simultaneously lead the government and conduct his personal affairs," Barak told a brief news conference at the Knesset early Wednesday afternoon.

He said Olmert could remove himself either by resigning form office, or by temporarily suspending himself, and called on the Kadima party to elect a replacement for its leader.

He said that while he was not standing by with a stop watch, "this has to happen soon, and I mean soon."

The alternative, he went on, was that Labour would work toward holding early elections,

Barak, who in the past faced an investigation into the funding of his victorious 1999 prime ministerial campaign, said Olmert's leaving office would be an "accepted norm" of behaviour.

Prior to Barak's announcement Olmert advisor Tal Zilberstein said the premier would not be resigning, since this would be an admission of guilt.

Olmert has made a firm decision to continue serving as prime minister, I say this on the basis of a conversation I had with him a short time ago," he told Israel Army Radio.

A former advisor to Barak, Zilberstein said the defence minister was "one of the last people who can talk about cash money and envelopes."

Barak last year threatened to end Labour's partnership with Kadima, and press for early elections, over a government report into Olmert's handling of the 2006 war in Lebanon, but never carried out his threat.

In May last year Foreign Minister Tzipi Livni also called on Olmert to quit after the premier was scathingly criticised in an interim report on the government's conduct of the war. However, she did not accompany her call with an ultimatum, and her revolt quickly fizzled out.

Meanwhile, a survey in the Ha'aretz daily published before Barak's announcement showed that only 14 per cent of the public accepted Olmert's version that the money he received from US businessman Morris Talansky was used to fund election expenses.

Talansky, who spent seven-hours testifying Tuesday in a pre-trail court appearance, said he also underwrote vacations for Olmert and advanced him loans which were never paid back.

Talansky testified Tuesday on behalf of the prosecution, who had pressed for the early deposition, because they fear Talansky, as a US national, may not return to Israel if and when a trial begins. (dpa)