MIDDLE EAST:Israeli prime minister Ehud Olmert admitted last night that he accepted campaign donations from an American businessman but denied that they were bribes and said he would only resign if he were indicted.
As Israel celebrated its 60th birthday with barbecues and military displays yesterday a judicial source said Mr Olmert was suspected of taking hundreds of thousands of dollars before he became prime minister in 2006. A police spokesman, lifting a media gag order, named New York financier Morris Talansky as a key witness.
In a terse, late-night televised statement to journalists at his residence in Jerusalem, Mr Olmert said he believed the crisis over the police investigation into the allegations would soon blow over.
Mr Olmert, already the focus of a series of corruption scandals in which he has denied any wrongdoing, is likely to face pressure to resign, thus upsetting peace talks with the Palestinians.
During yesterday's birthday festivities Star of David flags fluttered from cars, rooftops and balconies, fighter planes traced "60" in smoke trails across the sky, paratroopers dropped into the sea and a televised youth Bible quiz highlighted the place Jewish faith holds in a state mainly founded by secular Zionists.
War or the threat of it has clouded every day for Israelis since David Ben-Gurion declared the state, set up to be a haven for survivors of the Nazi Holocaust, in 1948.
Yesterday families gathered to focus on the positive and on national pride. "It's an emotional day," said Tzviya Gilboa (57) among vast crowds packing sunny beaches at Tel Aviv. "Anything that is connected to Israel is exciting to me."
At the celebration got under way Mr Olmert said the Jewish state craved an end to the decades-old conflict.
"In the state of Israel's 60th year, we can say that God has fulfilled his promise," Mr Olmert said yesterday, just hours before police said they expected to ease sweeping restrictions on reporting details of the investigation into his affairs.
"We, the descendants of Abraham, have inherited the land, we have filled it, we have made the desert bloom, built and made it glorious," he said. "The spirit of sacrifice still beats within us and is still sadly setting us trials that are hard to bear." Israel's most important ally and the chief sponsor of peace talks launched six months ago, US president George Bush, visits next week. So do top executives from Google and Yahoo - testament to Israel's success as a technology powerhouse.
Security was intense for fear of attacks and armed police guarded revellers on the beaches. Measures to stop Palestinians entering Israel from Gaza and the West Bank were tightened. Six Islamic Jihad militants were wounded in an Israeli air strike in the Hamas-controlled Gaza Strip, medical staff said.
As Israelis partied, Palestinians held a solemn march in Bethlehem to mark the "nakba", or catastrophe, of the Jewish state's creation, when about 700,000 people, half the Arab population of Palestine, fled or were driven from their homes. Holding banners vowing never to give up their "right to return to" land now part of Israel, protesters rallied around a 10-metre-long key, a symbol of the dream to reclaim lost homes.
"It hurts me dreadfully to see Israel celebrating because of our suffering, our expulsion and the loss of our homeland," said Monther Amireh, as Israeli aircraft roared overhead.