JERUSALEM -- A reluctant Ariel Sharon on Tuesday called early elections for Jan. 28 after the breakup of his fractious coalition, sending Israel into a tempestuous campaign that threatens to freeze U.S.-led Mideast peace efforts at a time of a possible confrontation with Iraq.
The surprise move also brought Sharon's archrival for Likud leadership, Benjamin Netanyahu, back into government as temporary foreign minister. Netanyahu, who calls for the expulsion of Palestinian leader Yasser Arafat, said he will challenge Sharon for the party leadership in a primary to be held within weeks.
The dramatic developments underscored the growing political instability in Israel, which has had five prime ministers in seven years. Sharon's coalition lasted only 20 months, despite his aim to hang on until next October, the originally scheduled election date.
Sharon flip-flopped over 24 hours, saying Monday it would be irresponsible to hold early elections, and announcing Tuesday he was dissolving parliament because he was unable to set up a stable coalition after the departure of the moderate Labor Party.
Sharon accused Labor of "political caprice" by bolting over Sharon's refusal to cut funding to Jewish settlements in the West Bank and Gaza Strip.
Palestinian reaction was muted. "We hope the Israeli people will elect a government that can deliver peace," said Cabinet minister Saeb Ereket.
The elections could well be influenced by the Palestinian militant groups Hamas and Islamic Jihad, which boasted Tuesday their bombing and shooting attacks on Israelis led to Sharon's downfall.
"Sharon's failure is one of the achievements of the uprising," said Ismail Abu Shanab, a Hamas leader in the Gaza Strip.
On Monday, an Islamic Jihad bomber killed himself and two Israelis in a shopping mall in central Israel -- and Hamas said there would be more attacks during the election campaign.
The violence has pushed Israelis to the right amid growing disillusionment with Arafat, who has done little to stop the attacks.
But many analysts predicted the result of the election would be yet another Likud-Labor coalition.
Both Sharon and Labor chief Binyamin Ben-Eliezer face internal challenges.
In Labor's Nov. 19 election for a new leader, Ben-Eliezer -- who as Sharon's defense minister oversaw military offensives against the Palestinians -- trails a pair of more dovish candidates, legislator Haim Ramon and Haifa Mayor Amram Mitzna, a retired general.
Likud's primaries will take place in coming weeks. Initial polls suggested Netanyahu, who was voted out of office in 1999, would wrest the party leadership from Sharon, but more recent surveys indicated he had fallen behind.
Winners of the Labor and Likud primaries will be their parties' candidates for prime minister. Israel is returning to an indirect electoral system, with voters choosing a party, not a prime minister. The politician first able to form a stable coalition will become premier.