Use of influence
The website of Ha'aretz, an Israeli daily newspaper, said the investigation will focus on suspicions that Olmert, when acting finance minister in 2005, tried to direct the tender for the sale of the bank toward Frank Lowey, a real estate businessman, and another close friend.
|"According to what I've heard from the justice ministry, there is nothing going on, so there is nothing I should react to"|
Ehud Olmert, Israel's prime minister
The bank was eventually sold to another company with no relation to Lowey.
Police spokesman Micky Rosenfeld said a decision would be made later Tuesday about which police unit would carry out the investigation.
Olmert was informed of the decision Tuesday afternoon. Olmert spokeswoman Miri Eisin refused to comment.
Eli Zohar, Olmert's lawyer, said the prime minister was keen to clear his name.
"I welcome the decision to open an investigation so that once and for all we can end this irrelevant misunderstanding," Zohar told Israel Radio.
"We hope the investigation will be conducted quickly and efficiently so that the witch hunt and criticism will disappear."
Loss of confidence
Ha'aretz said police opened an unofficial inspection into the suspicions two months ago. The newspaper said Shendar opted for a criminal investigation after Menachem Mazuz, the attorney general, removed himself from the case due to the fact that his sister, Yemima Mazuz, is a legal adviser at the ministry of finance.
Davd Chater, Al Jazeera's correspondent in Jerusalem, said that the allegations against Olmert were potentially extremely damaging to public confidence in Israeli politics.
"The [allegations] are adding to the sense of paralysis at the heart of the Israeli government, because the whole of the top echelon at the moment seems to be mired in lots of scandal.
Other senior Israeli politicians are facing legal challenges. Moshe Katsav, Israel's president, could be indicted on charges of rape and other serious offences.
Haim Ramon, former justice minister, is on trial for allegedly forcibly kissing a female soldier and Avraham Hirchson, the current finance minister, could be implicated in an embezzlement case during his tenure in a previous position.
Chater said that the Olmert probe could also destabilise peace efforts brokered by the US.
"It could damage the peace process at a very crucial time - when Condoleezza Rice [the US secretary of state] is trying to add new momentum to the peace process. This kind of scandal will absolutely undermine those efforts," Chater said.
After the investigation is completed, its findings would be turned over to the attorney general's office, which would have the final say about whether an indictment would be filed. The process is likely to take months.
"[The allegations] could damage the peace process at a very crucial time - when Condoleezza Rice [the US secretary of state] is trying to add new momentum to the peace process"
Al Jazeera correspondent in Jerusalem
Speaking to reporters in Beijing last week, where he was on an official visit, Olmert refused to make any comment on the reports.
"According to what I've heard from the justice ministry, there is nothing going on, so there is nothing I should react to," he said.
He insisted that he had "acted clean-handedly" over the privatisation of the bank.
"I have no doubt that the process was conducted in the best way possible," he said.
The prime minister has been the subject of several corruption investigations involving property deals and appointments. No formal charges have been filed against him.
Olmert's ratings are at their lowest since he became prime minister in May 2006. A poll published last week showed Olmert's approval ratings have slipped to 14 per cent and that his Kadima party would lose nearly two-thirds of its strength if new elections were held.