JERUSALEM — THIS week's decision by Labor Party leaders to withdraw from Israel's coalition government has created a dilemma for Prime Minister Yitzhak Shamir. Fearing that new elections could produce a government dominated by right-wing elements loyal to his chief political rival, Trade Minister Ariel Sharon, Mr. Shamir does not want Labor to dissolve Israel's six-month-old ``national unity'' government.
But in the weeks remaining before Labor decides whether to finalize its decision, there is little Shamir can do without taking huge political risks to convince Labor that he is serious about the issue that now threatens to split the coalition: Israel's latest peace initiative.
``Shamir is in a bind,'' says Hebrew University political scientist Avraham Diskin. ``On one hand he has nothing to fear from new elections, which Likud could win easily. On the other hand, he does not want to be dependent on the coalition partners such elections would produce.''
Whether Shamir can keep Labor from bolting depends largely on whether he can make a more convincing case that recent conditions attached by the Likud Party to the government's peace initiative have not fatally weakened the plan.
It will also depend on the United States, which is seeking to keep the peace plan from unravelling in the cross fire of Israeli domestic politics. A high-level US delegation headed by Deputy Secretary of State Lawrence Eagleburger is expected to travel to Jerusalem next week. The US team will tell Labor leaders that a decision to quit the government will destroy the remaining credibility of the peace initiative, making it impossible for the US to convince the Palestine Liberation Organization to go along.
The potential government crisis was created Monday when the Labor Party's Executive Bureau voted to dissolve the government in protest over the Likud conditions which, among other things, bar peace talks unless the Palestinian uprising is halted and prohibit Arabs living in East Jerusalem from participating in West Bank and Gaza elections.
Shamir has surrendered ``to those who did not even hide their intention ... to bury the initiative altogether,'' Defense Minister Yitzhak Rabin, co-author of the plan, complained to the Labor bureau. ``If this continues to be the case I see no point in our continued participation in the government.''
A final decision on whether to withdraw will be made by the party's 1,300-member Central Committee, which is expected to meet in a few weeks.
Anticipating the possible collapse of the government, both Shamir and Labor Party leader Shimon Peres have begun courting Israel's small, religious parties with an eye to forming a narrow-based government.
Monday's decision has also created an acute dilemma for Labor.
Staying in the government under the terms imposed by Likud would only accentuate the extent to which Labor has become powerless and irrelevant.
On the other hand, pulling out would cost the party 11 Cabinet posts and leave key party interests, including the huge, Labor-backed Histadrut trade union at the mercy of unsympathetic interests.
In addition, pollsters say Labor support has eroded sufficiently that if new elections were held, the party could end up losing several seats in the Knesset, or parliament.
Moreover, if Labor were to walk out in protest over the conditions attached to the peace plan by the Likud, it would be forced to campaign from a position of weakness.
``What platform does Labor have to run on, giving away Jerusalem?'' asks one skeptical analyst in Jerusalem.
Labor sources cite at least two ways Shamir could forestall Labor's departure.
One would be to let Sharon bring his reservations to a vote of the full Cabinet, giving Likud ministers allied with Shamir a chance to defeat them and thus to undo the damage done by the Likud Central Committee. Shamir aides deny any such intention.
Another would be a public memorandum of understanding between Shamir and the visiting US delegation that would say, in effect, that decisions reached at the Likud plenum are not binding on Likud ministers.
Under either of these circumstances, say various Labor sources, the party would almost certainly vote to stay in the government.
But analysts say these are concessions Shamir cannot make without creating a new crisis in his own party.
If new elections do take place, the almost certain beneficiary will be the Likud, which will win more Knesset seats and thus be in a stronger position than it was in November, following Israel's last general elections, to form a narrow coalition without Labor.
But such a government holds major drawbacks for Shamir. In addition to increasing the influence of hostile right-wing elements in and outside the Likud, led by Sharon, future peace moves by such a government would lack the legitimacy that now derives from Labor's presence in the coalition.
``Shamir is desperate,'' says Professor Diskin. ``He needs the continuation of this government to avoid having to satisfy Americans, right-wingers, and world Jewry by himself.''
``On one hand he has a party to deal with. On the other hand he has a government to deal with. He has no choice,'' says Labor Party minister Mordechai Gur. ``If he doesn't make it clear without any doubt that the government initiative remains as it was, he's ruined as prime minister.''
``All of us have agreed to give the process time,'' adds Mr. Gur of his Labor colleagues.
``None of us will chose to remain if we don't get [the right signals].''