Shimon Peres was ousted as Israel's Labour Party leader on Thursday by a trade union chief who vowed to quit Prime Minister Ariel Sharon's ruling coalition and usher in early elections.
After a leadership contest that shook up Israel's political landscape, Amir Peretz, 53, said he would press Sharon to set a date for a national ballot, advancing an election not due until November 2006. Israel Radio said talks would be held on Sunday.
Largely unknown on the international stage, Peretz was declared the winner of a rank-and-file ballot by a 42 to 40 percent margin over Peres, Labour's elder statesman who has won a Nobel Peace Prize but never a general election.
Peretz's victory appeared to reflect support for his call for a return to Labour's socialist roots and disillusionment with Peres, 82, for failing to revive Israel's once-dominant party after its crushing defeat in the 2003 general election.
Peretz, a Moroccan immigrant whose father toiled in a kibbutz factory, takes the helm of a centre-left party that has long been a bastion of the European Jewish elite.
"I expected a better evening," a glum Peres confessed at a news conference, clearly stunned at the election's outcome.
Polls had predicted that Peres, Israel's vice prime minister and an architect in the 1990s of now-tattered peace deals with the Palestinians, would coast to victory.
Political upheaval in Israel is expected to keep diplomacy with the Palestinians, already on hold after a surge of violence following Israel's Gaza pullout, in a deep freeze for now.
Amid chants of "the next prime minister" from supporters, Peretz, head of Israel's Histadrut trade union federation, said: "This can truly be Israel's most important hour."
Peretz pledged to pull the party out of Sharon's coalition over free-market reforms and spending cuts he said have worsened the plight of Israel's poor.
Sharon has relied on Labour's parliamentary support to prop up his government, already shaky because of divisions in his rightist Likud over Israel's Gaza withdrawal in September.
Gideon Saar, parliamentary whip for Likud, called Peretz "irresponsible, very extreme".
Peretz's win pushed down the Israeli shekel and Tel Aviv stocks in Thursday trading. Trying to calm nervous financial markets and appeal to mainstream Israelis, Peretz declared: "I don't intend to hurt the free market or competition."