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Olmert vows to seek compromise with Palestinians

But his Kadima party's showing apparently weaker than expected

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Acting Prime Minister Ehud Olmert waves to supporters at a rally early Wednesday.

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JERUSALEM (CNN) -- Acting Israeli Prime Minister Ehud Olmert is promising to work toward a compromise with the Palestinians after his Kadima party led parliamentary elections, but he warned: "We will not wait forever."

Analysts said, however, that Kadima's weaker-than-expected showing in exit polls would make it harder for Olmert to continue the policy of unilateral withdrawals from Palestinian territory he inherited from Israel's incapacitated leader, Ariel Sharon.

Israeli media were reporting Wednesday that with 99.6 percent of Tuesday's votes counted, Kadima won 28 seats, Labor 20 and Shas, a Sephardi Ultra Orthodox party, 13. Yisrael Beitenu, the conservative Russian immigrant party, won 12, and Likud took 11. (Watch how Israel's vote Tuesday was historic -- 2:59)

Olmert has been interim leader since the January stroke that left Sharon in a coma. The former Jerusalem mayor has vowed to define Israel's permanent borders within four years -- with or without talks with the Palestinians -- by evacuating many of the smaller Jewish settlements in the West Bank and annexing the larger ones.

"For thousands of years we have dreamed in our hearts of a greater Israel, an entire land of Israel, and such a country will always remain a dream in our hearts," Olmert said early Wednesday at a victory rally.

Yet Israel is willing to get rid of Jewish settlements in the West Bank "with great anguish ... in order to bring about the conditions that will allow you to also put into practice your own dream and live side-by-side with us in your own country, in peace and in tranquility," he said.

But he said the Palestinian Authority -- now run by the Islamic militant group Hamas, which calls for the destruction of Israel -- must renounce terrorism and accept Israel's right to exist.

"We will not wait forever," he said. "The time for action has come."

Strong showing for Labor

Kadima -- the 4-month-old centrist party founded after Sharon broke with the conservative Likud -- was projected to win 28 seats in the 120-member Knesset, according to exit polls. The leftist Labor Party was projected to win a better-than-predicted 20 seats, making it Olmert's likely partner in a new coalition government.

Labor Party leader Amir Peretz had been criticized for concentrating his campaign on economic issues rather than security. But Isaac Herzog, a leading Labor parliamentary candidate, said Labor had won the right to be "a major part of any future government."

"We are pleased with the fact that our social democratic agenda was well-received by the Israeli public and won a central place in the incoming parliament," Herzog said.

Other exit polls gave Kadima up to 32 seats, still short of the 40 Olmert said he had been seeking. Voter turnout was 63.2 percent, election officials reported -- far lower than the country's last elections, which saw nearly 68 percent turnout, and a historic low in parliamentary balloting.

Olmert had said he had been looking for enough of a mandate to continue Sharon's policy of unilateral withdrawals from the West Bank and Gaza, the Palestinian territories Israel has occupied since the 1967 Mideast war -- the policy that led to Sharon's break with Likud.

Sharon founded Kadima shortly before his stroke, and Tuesday's election was the first in which the party ran candidates. Olmert praised Sharon as "the man who had the courage, the determination, the desire to see things differently -- who changed direction and brought about hope."

Israeli political analyst Yossi Klein Halevi said Olmert managed to "squeak through" but failed to win enough support to continue Sharon's policy without a broader mandate from Israeli voters.

"He has a technical mandate to create a coalition," Halevi said. "Given the fact that he ran on the position of unilateral withdrawal and Olmert himself defined this vote as a referendum, this is a failure -- a defeat for unilateralism."

The immediate challenge facing any Israeli government is a Palestinian legislature headed by Hamas -- a party that is considered a terrorist group by Israel, the United States and the European Union. The new Palestinian government formally took power Wednesday. (Full story)

Likud's rank-and-file members opposed Sharon's withdrawal plan, and Sharon's longtime Likud rival, former Prime Minister Benjamin Netanyahu, quit the government in protest of the Gaza withdrawal. Netanyahu -- who led Likud into Tuesday's vote -- called the election results a "body blow" for the party but told supporters: "In the course of time, we will be proven right."

"We know that our path to achieve security and peace is the right path," he said. "We do not bend to the whims of mere fashion. We know that our party is the only one that can put security on a solid footing and guarantee for all of us that we will have a safe and secure future." (Watch why the Likud party faces an uncertain future -- 2:28)

Palestinian negotiator: Vote outcome a surprise

After the exit polls were announced, chief Palestinian negotiator Saeb Erakat said he was surprised Israelis checked more doves than hawks on the ballot, and he likened his surprise to the confusion Israelis felt when Palestinians elected Hamas to lead them in January.

"Two months ago Palestinian voters managed to confuse and surprise Israelis," Erakat said. "Tonight, Israeli voters managed to confuse and surprise us."

He further expressed hope that Israel would abandon unilateralism and embrace peace negotiations with Palestinians.

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