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Two Israeli rivals clash in noisy power struggle // Shamir center of shouting match; Sharon says he's quitting

TEL AVIV - The Likud party, the dominant partner in Israel's 14-month-old coalition government, was at risk of splitting in two Monday after Prime Minister Yitzhak Shamir walked out of a party congress to boos and catcalls, and Trade Minister Ariel Sharon, his hawkish rival, announced his resignation from the government. The party's central committee was attempting to promote party unity, but instead the meeting degenerated into a shouting match between Shamir and Sharon over leadership of the party and the prime minister's diplomatic initiative for Palestinian elections.

Although both men later claimed to have won the power struggle, it was not clear Monday where either stood. Shamir said he would not decide whether to accept Sharon's resignation until he had received a copy of the letter, and Sharon himself seemed to have second thoughts, saying he would attend a Cabinet meeting Wednesday, because his resignation would not have taken effect.

By the time the 90-minute party session ended Monday, supporters of Sharon had scuffled with the prime minister's bodyguards and Sharon had asserted his authority inside the hall in a manner that suggested a party coup.

Sharon and Shamir dueled over their microphones, each man insisting that he was in charge, and each calling for votes on resolutions of his own devising.

Shamir, hoarse and looking strained, openly pleaded for a vote of confidence. He was shouting "Who is for me?" as Sharon, his face soaked in sweat, tried to drown him out.

There was no certainty that the uproar would affect government policies. Shamir claimed that he won an endorsement of his peace initiative. Sharon disputed that claim, but the party did not clearly demand that the peace initiative be changed.

Both men later claimed that the meeting had gone well.

"The Likud is all right; it is united and strong," Shamir said. "There was an event that rarely happens in democratic bodies. A majority had difficulties exercising its authority against a minority."

Shamir, in partnership with Labor, has proposed holding elections in the West Bank and Gaza Strip to select Palestinians to negotiate an interim peace settlement with Israel.

Since making his proposal last May, Shamir has come under considerable pressure from the United States to agree to several preliminary steps, including a meeting between Israeli and Palestinian delegations. That plan has strong support from Egypt.

Sharon and his allies have warned that such talks would provide a role for the Palestine Liberation Organization (PLO). Sharon has insisted that Palestinians living in East Jerusalem should be barred from participating, as should Palestinians deported from the territories.

Sharon, a controversial former minister of defense, has a reputation as a resourceful tactician.

As chairman of the meeting, he went on the attack from the moment the special meeting began, controlling the microphone and then unexpectedly announcing his resignation as minister of trade and industry.

His announcement brought his supporters to their feet shouting his name. He then criticized Shamir in unusually harsh terms.

"Under your government, Palestinian terror is unrestrained in the whole of Israel, and is leading to heavy losses of innocent Jews and Arabs," he charged. "The government's policy has brought about the fact that Jewish lives are being lost."

Sharon repeated his frequent call for tougher measures against the 2-year-old Palestinian uprising, and said his resignation reflected his belief that Shamir had led the country into grave danger.

"There are moments when a person must know when to get up and start to march," he said. "There are moments in the life of a nation, of a people, when they must awaken and fight calamity with all their might. This might be the last hour to do this."

Meanwhile, Israel's largest bank says the Palestinian uprising in the occupied West Bank and Gaza Strip cost Israel up to $1-billion in direct losses in its first two years but now has much less impact on the economy.

Bank Hapoalim said in a newsletter Sunday that its researchers estimated total direct costs from lost growth and production at between $800-million and $1-billion dollars - $600-million to $700-million of it during the first year.

The revolt against Israeli rule erupted in December 1987. In the first full year construction and tourism were hit hard and army reservists were forced to serve longer.

"But these effects faded during 1989, and their influence on the overall economy, at less than 1 percent of gross national product, became marginal," the bank said in a monthly report.

The uprising, or intifada in Arabic, meant a loss of about 1.5 percent of Israel's $42-billion dollar economy in 1988 and between 0.5 and 1 percent last year, the bank said.

A bank spokeswoman said Monday that Israel's gross domestic product grew only 1.1 percent last year - down from 1.7 percent in 1988. She said this was caused mainly by government austerity and the restructuring of industry.

Palestinian strike days have cut the number of Arab workers entering the Jewish state, where they form much of the building labor force, and Israeli-made goods have been boycotted in the occupied territories.

Israeli troop strength in the territories has fallen from the early months of the uprising but remains higher than before the revolt began.

The bank said its researchers found "the situation in all these sectors improved in 1989 compared to 1988 as Israeli producers and employers learned to make alternative arrangements, and the labor market responded to the new conditions."

Palestinian absenteeism fell, and other workers were replaced with Israelis or new machinery, the bank said. The higher costs were offset by improved quality and productivity.

But the bank said there were other costs to the economy, which is suffering low growth and unemployment at a 22-year-high of more than 10 percent, caused by the revolt. The bank said "indirect costs, such as the political and economic uncertainty generated by the unrest," negatively affected investment decisions.