Aides to the Israeli Prime Minister Ariel Sharon, after his defeat in a Knesset vote by the opposition of “rebels” of his own Likud party, said that the Likud is now effectively split into two divisions; the first headed by Sharon while the second is led by Likud rebels.

A Likud member said after the vote on Monday that the vote has proved that the Likud “is, de facto, two factions”, and referred to the possibility that the Prime Minister will move for early elections.

Sharon will have to decide now whether to dissolve his government and call for early elections, or to form a new political body. Either way, he will face difficulties in having the 2006 budged approved by the Knesset.

Israeli online daily, Haaretz, reported that Likud rebels, encouraged by their victory in the Monday Knesset vote, might demand expanding the settlements in the West Bank in exchange for their support to the 2006 State Budget.

Sharon’s defeat came on Monday evening when the Knesset approved the appointment of Ehud Olmert as the Israeli Minister of finance by 71-41 margin, and Matan Vilnai as Science Minister. Sharon, was attempting to name Olmert together with Roni Bar-On and Ze’ev Boim.

The eight ministers who apposed the appointment were Uzi Landau, Michael Ratzon, David Levy, Naomi Blumenthal, Ayoub Kara, Ehud Yatom, Yuli Edelstein, and former finance minister Benjamin Netanyahu. MK’s Gilad Erdan, Yuval Steinitz, and Moshe Kahalon, did not attend the vote.

Anti-pullout rebels at the Likud opposed the Bar-On and Boim appointments because they view them essentially as a bribe for the two MKs’ support of the disengagement.

MK Ehud Yatom, one of the Likud rebels, said that the “rebels’ camp will condition their support for the budget will be conditional on expanding settlement construction in the West Bank.