The government of Prime Minister Ehud Olmert moved a step closer to collapse on Wednesday when Strategic Affairs Minister Avigdor Leiberman resigned his cabinet chair and announced the withdrawal of his Israel Beiteinu Party from the ruling coalition.

Lieberman said he could no longer remain in a government that was making policy based on the illusion that surrendering land to the Palestinians will bring peace to the region.

The move comes less than a week after US President George W. Bush sat down to dinner with the Israeli cabinet and strongly urged the gathered ministers to refrain from destabilizing the Olmert government while it is involved in helping to birth a Palestinian Arab state.

Even with Israel Beiteinu's departure, the Olmert government still commands a 67-seat majority in the Knesset. However, many expect the religious Shas Party to follow Israel Beiteinu's lead for similar reasons, and for Olmert's largest coalition partner, the Labor Party, to pullout next month following the publication of the Winograd Commission investigation into the mishandling of the 2006 war against Lebanon's Hizballah.