by Ron Bousso

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ATTENTION - UPDATES results, ADDS Ayalon quote ///

TEL AVIV, June 13, 2007 (AFP) - Former premier Ehud Barak early Wednesday declared victory in a vote for Israel's Labour party leadership, completing a spectacular comeback set to rattle Prime Minister Ehud Olmert's government.

"Today I become Labour party's chairman instead of (Defence Minister) Amir Peretz," he announced from the podium in Labour's headquarters in Tel Aviv to the cheers of hundreds of party activists.

With over 95 percent of the votes counted, Barak emerged as the winner with 53 percent of the vote against ex-security chief Ami Ayalon, who received 46 percent. The remaining one percent voted blank.

Barak, 65, Israel's most decorated soldier who has also served as defence and foreign minister, has announced his intention to replace outgoing party chairman Peretz as defence minister in order to lead reforms in Israel's army following last year's war in Lebanon.

"The internal rivalry is over. Now we must each make an effort in his field. I intend to put in all my knowledge in order to strengthen the defence establishment and the army and return Israel's deterrence," he said.

Peretz became the latest casualty of last summer's war when he came in a distant third during a first round of voting on May 28.

Surrounded by several Labour ministers and MPs who had backed him during the primary campaign, Barak announced his return to politics after a six year hiatus with a promise to lead Labour to victory in the next elections.

"In these days of anxiety and a sense of insecurity and loss of direction, Labour party must stand out as Israel's leading democratic alternative," he said.

Barak's election was expected to lead to a wider reshuffle in Olmert's cabinet, where Labour is a key coalition partner. Other than replacing Peretz at the defence ministry, Labour is also expected to ask for the finance portfolio currently held by Olmert's Kadima party.

Further changes could take place if deputy prime minister Shimon Peres, of Kadima, is elected Israel's new president in a parliamentary vote on Wednesday.

Barak also vowed during his campaign to pull Labour out of government unless the beleaguered premier steps down following scathing criticism of his handling of the war in Lebanon.

But behind the campaign slogans, Barak appeared more cautious. He is aware that he may not be able to form a new majority and loath to face early elections that most surveys show the rightwing opposition Likud would win.

"I can't see any indication that Labour will leave the government," a senior Kadima official told AFP on condition of anonymity, echoing sentiments by allies of both men.

Party general secretary Eitan Cabel said earlier that Labour would consider withdrawing from Olmert's coalition after the release in August of the final report of an inquiry committee into the government's conduct during the war.

"The watershed moment will be the release of the full war report, and when that moment arrives, we will make our assessments," he told AFP.

Olmert intends to invite Labour's newly elected chairman as early as this week to brief him on the security situation in the Gaza Strip and Lebanon, officials in his office said.

Throughout their campaigns, both Ayalon and Barak highlighted their strong security backgrounds and vowed to rebuild deterrence after last year's inconclusive Lebanon war.

Barak emphasised his experience and the fact that he beat Likud chief Benjamin Netanyahu -- whose party currently leads all opinion polls -- in the 1999 legislative election.

Tuesday's runoff vote pitted Barak against Ayalon, 61, a novice with one year's experience in elected office promising a fresh start.

Ayalon, a former head of the Shin Beth internal security services, said he would not contest the results and was ready to concede defeat.

"I intend to respect the results and call Barak to congratulate him. We will work together," he said.

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Mideast-Israel-politics-Labour