Israel's Gaza pullout plan passed a crucial political test when the parliament gave preliminary approval to compensation payments for Jewish settlers to be uprooted and procedures for their evacuation.
The Wednesday vote reflected both a serious split in Prime Minister Ariel Sharon's hardline Likud Party and his new but fragile alliance with the moderate opposition Labor Party, which voted for the Gaza pullout bill.
The Sharon-Labor combination did not extend to another key issue, the state budget, and the premier was forced to postpone a vote after failing to muster a majority with Labor opposed. The budget battle could bring Sharon's government down early next year.
The compensation bill sailed comfortably through the Knesset, 64-44, in a preliminary vote.
A senior aide to Sharon said the "unilateral disengagement" plan is likely to get a boost with the re-election of US President George W. Bush, who endorsed it as a way of breaking the Israeli-Palestinian deadlock.
The Gaza withdrawal, combined with the possible replacement of the ailing Palestinian leader Yasser Arafat, could open new peace prospects, said the aide, Raanan Gissin. Sharon has refused to consult with Arafat on the plan, accusing him of supporting terrorism.
If Bush's second administration "starts with an initiative on our part, it opens a gateway to return to the `road map' to peace ... provided the Palestinian leadership -- the new Palestinian leadership -- seizes this opportunity," Gissin told reporters.
Arafat was undergoing tests in Paris to diagnose a serious illness that has led some Palestinians to think the era of Arafat's domination is nearing an end. Arafat's condition deteriorated further on Wednesday, Palestinian officials said.
Palestinians also hoped Bush will be more active in his second term in Mideast peacemaking.
"We hope there will be a change in the policy which gave support for Israeli Prime Minister Sharon and refused cooperation with President Arafat," said the Palestinian foreign minister, Nabil Shaath.
Both Israel and the Palestinians have accepted the US-sponsored `road map,' which envisions the establishment of a Palestinian state in the West Bank and Gaza Strip. But the plan has languished, with neither side carrying out its initial requirements. Israel was to stop settlement construction and Palestinians were to dismantle violent groups attacking Israelis.
With peace moves frozen, Sharon opted to act unilaterally. He said his pullout plan would stave off international initiatives calling for deeper Israeli concessions, improve Israeli security and solidify its hold on parts of the West Bank where most of the territory's 236,000 settlers live.
The settler compensation bill is a key political hurdle. The Knesset already had approved the disengagement plan in principle, but Wednesday's vote was the first time the legislature debated the specifics and the costs.
Before it becomes law, it still requires two more parliamentary votes after fine tuning by a committee. Legislation is rarely rejected after passing the initial vote.
The bill promised a package of hundreds of thousands of dollars to each settler family.
The amount would vary according to the size of the family, how long they lived in the settlement, and where they move. The bill also fixes penalties, including jail terms, for settlers who forcibly resist evacuation.