Jacky Rowland, Al Jazeera's correspondent in Jerusalem, said that the fact Livni has chosen to speak out indirectly against Olmert, may suggest she could be positioning herself to take the prime minister's post.
"The fact that she has said this will fuel speculation that there is some kind of deal in the making between Ehud Barak [Israel's defence minister] and Tzipi Livni.
"The suggestion is that the ministers in the current government don't want the government to fall apart, they want to hold the coalition together, but they do want to get rid of the prime minister.
"If, in fact, Olmert is forced out, and there is a lot of pressure for him to go, then Tzipi Livni could find herself sitting in the prime minister's chair, at least temporarily, until new general elections are called."
'Values and norms'
Widely regarded as a candidate to replace Olmert, Livni did not call for Olmert to step down but said "values and norms" must be upheld in Israeli politics.
Barak, however, said on Wednesday that he would force the issue if Olmert failed to act.
"The prime minister has to make decisions. Factions have to make decisions, and if they don't, we will make the decisions for them," said Barak, whose Labour party is Olmert's largest coalition partner.
"I do not think the prime minister can run, in parallel, the government and deal with his own personal affairs," Barak said.
"Out of a sense of what is good for the country ... I think the prime minister must disconnect himself from the daily running of the government."
But Olmert's aide, Tal Silberstein, said: "The prime minister was not considering resigning, nor taking a leave of absence."
Barak also threatened on Wednesday to pursue an early election, after a US businessman told an Israeli court he had handed Olmert envelopes with thousands of dollars in cash.
But Barak, a former prime minister, stopped short of making a move that would immediately bring down the government and trigger a snap election.
Menachem Mazuz, Israel's attorney-general, convened prosecutors and police officers on Thursday to discuss the way forward in the investigation against Olmert.
Mazuz issued a statement after the meeting saying the investigation would be speeded up "in order to complete it as soon as possible", but gave no precise timeframe.
Olmert pledged to resign if charged and denied any wrongdoing in accepting what he has described as above-board election campaign contributions.
Polls suggest the right-wing Likud party, under Benjamin Netanyahu, would defeat Labour if a vote, not due until 2010, were held now.
The American Jewish businessman at the centre of the case, Morris Talansky, is due back in Israel in July when he will be cross-examined by Olmert's lawyers.
Talansky told the Jerusalem District Court on Tuesday that he had loaned Olmert hundreds of thousands of dollars to cover the Israeli leader's political activities over a 15-year period.
In his testimony, Talansky said he had been asked to pick up a $4,700 bill from a three-day stay by Olmert at a New York hotel.
Talansky also said that he loaned Olmert as much as $30,000 for a holiday in Italy.
Olmert, who has denied any wrongdoing, has acknowledged receiving money from Talansky, but said the funds were legal election campaign contributions.
Moshe Lador, the chief prosecutor in the case, said after Talansky testified on Tuesday it was too early to tell if charges would be brought against Olmert.
|Barak said Olmert should "disconnect himself |
from daily running of the government" [AFP]
Akiva Eldar, chief political correspondent for Israel's Haaretz
daily, told Al Jazeera on Thursday: "The implications are very clear... partnership with Olmert right now is a liability. The countdown has already started.
"The question is what kind of sad end this is going to have. One option is to force Olmert to step down, but he is not likely to do this.
"A most likely scenario is the two Ehuds coming together on a date for early elections."
Eldar said Olmert is already "an invalid" if not a lame duck.
"He is not in a position ... that he can pursue any peace process," Eldar said.
The political turmoil threatens to derail US-efforts to secure an Israeli-Palestinian peace deal before George Bush, the US president, steps down in January.
Nour Odeh, Al Jazeera's correspondent in Ramallah, said Mahmoud Abbas, the Palestinian president, was concerned about the peace process should Olmert step down.
"The office of the Palestinian prime minister said this crisis could derail the peace process, not necessarily because the peace process is going so well ... but because of opinion polls in Israel that suggest if any elections are held in Israel at the moment Benjamin Netanyahu, the right-wing Likud leader, could be prime minister," she said.
|The corruption allegations appear to have |
damaged Olmert's standing with Israelis [AFP]
"That certainly would not be good news for anyone involved in a peace process with Israel, as far as the Palestinians are concerned - they have tried with Netanyahu before and they would not particularly look forward to dealing with him again."
Marwan Bishara, Al Jazeera's senior political analyst, said some reports had emerged of suspicions about "why suddenly a witness came all the way from New York to talk about cash being handed to Mr Olmert".
"Is it coincidental that just when Mr Olmert is speaking about the possibility of peace with Syria new corruption charges are creeping against him?" he said.
"There are some suspicions out there - in Israel and outside Israel - that maybe just because there is some talk of peace and perhaps reaching a deal with the Palestinians this year that certain segments of the Israeli security establishment are interested in sidelining Mr Olmert."