Aides to Ehud Olmert were quoted Tuesday as saying that the prime minister will soon move to replace Amir Peretz as defense minister, in the wake of fierce feuding between the leaders.

The degenerating relations between the two reached a new low this week, after Olmert learned after the fact, that Peretz had spoken Sunday night before by telephone with Palestinian Authority Mahmoud Abbas in order to discuss a Peretz proposal for a mutual cease-fire.

Army Radio, citing unnamed figures close to Olmert, said that after the State Budget is passed, the prime minister may make it known to Peretz that if he wants to remain in the cabinet, he must yield his ministry and accept a different portfolio.

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But the move could precede the end-of-year budget discussions, should the tension between Olmert and Peretz escalate, the report said.

Cabinet Minister Ya'akov Edri of Olmert's Kadima party said Tuesday that Labor should keep the defense portfolio, but that Peretz, the embattled chairman of Labor, should step aside from his present post.

Among the possible replacements mentioned for Peretz are former prime minister Ehud Barak, and current Defense Ministry Director-General Gabi Ashkenazi.