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Safed's chief rabbi, Shmuel Eliyahu, will not stand trial for inciting racism, the prosecution decided yesterday after a deal was struck between the rabbi and the northern district attorney.

Under the deal, which was sanctioned by the attorney general and the state prosecutor, Eliyahu will publish a statement clarifying the statements that led to the indictment, and the state will withdraw the charges against him.

The three-count indictment against Eliyahu was filed in the Nazareth Magistrate's Court some four months ago, following statements that he made against Arabs in media interviews.

The first charge related to statements made by Eliyahu in 2002, when he called on two occasions for the expulsion of all Arab students from Safed College.

These interviews with Eliyahu took place in the wake of a terror attack on a bus in Meron.

An Arab student from Safed College was suspected at the time of failing to warn authorities of the pending attack.

The second charge related to statements made by Eliyahu in a July 2004 radio interview, when he again called for an all-Jewish Safed College. A month later, the rabbi urged Jews not to sell or rent apartments to Arabs.

Under his deal with the state, Eliyahu will issue an unequivocal retraction of the statements attributed to him in the indictment. He will also issue an apology to anyone who may have been offended by his statements and call for respect to be shown toward Israel's Arab population, and particularly Arab students in the north.