GAZA CITY, 18 January 2007 — The possibility of a new round of violence raised its head yesterday as renewed coalition negotiations between the rival Fatah and Hamas movements hit a fresh hurdle, people close to the talks said.

In recent days, negotiators had reported significant progress in the talks, being held in the Syrian capital Damascus. But Fatah’s chief negotiator left Damascus yesterday, and it was not clear whether a new round of talks would be held, the officials said. They spoke on condition of anonymity because they weren’t authorized to speak to the media.

In another significant development, Israeli military chief Lt. Gen. Dan Halutz has resigned, yielding to vocal demands that he pay the price for Israel’s flawed summer war in Lebanon.

Halutz’s decision to step aside, announced early yesterday, was followed by calls on Prime Minister Ehud Olmert and Defense Minister Amir Peretz to follow suit over their roles in Israel’s largest military operation since 1982.

Meanwhile, Moussa Abu Marzouk, deputy head of Hamas politburo, denied that the talks were in trouble.

“Negotiations were good. There was positive talk about all the subjects that have been raised. All parties are supposed to be positive,” Abu Marzouk told AP by telephone in Damascus.

“We are about to achieve a partnership and this needs constant dialogue,” he said.

Tensions have been high for the past year since Hamas defeated President Mahmoud Abbas’ Fatah movement in legislative elections. Abbas favors peace talks with Israel, while Hamas remains committed to Israel’s destruction, despite an international boycott against the Hamas-led government.

Abbas has been pushing Hamas to join him in a more moderate coalition. Those talks broke down in November, leading to a month of political violence that killed 35 people in the Gaza Strip. The Damascus talks have been aimed at ending the infighting and renewing coalition talks.

Israel’s Halutz stepped down at the end of an already turbulent day for Olmert. Hours earlier, the Justice Ministry ordered police to launch a criminal investigation into his conduct in the sale of Israel’s second-largest bank before he became prime minister last year.

Troops, bereaved families and even members of Israel’s tightly knit military elite have been calling for Halutz’s head ever since the monthlong war against Lebanese Hezbollah ended on Aug. 14.

Israel launched the full-scale assault just hours after Hezbollah captured two Israeli soldiers and killed three others in a July 12 cross-border raid.

The country went into the war as a united front against Hezbollah, but that solidarity collapsed after the fighting ended. Critics questioned whether Israel went too hastily to a war that ended without achieving its declared aims — recovering the captured soldiers and crushing Hezbollah.

More than 1,200 people were killed on both sides, most in Lebanon, according to UN, Israeli and Lebanese officials.

Israel claims it killed 600 fighters, but that number has not been substantiated, and Lebanon says most of its casualties were civilians.

Northern Israel, meanwhile, was nearly paralyzed by the over 4,000 rockets fired from Lebanon during the fighting, and 159 Israelis were killed, including 39 civilians who died in rocket attacks.

Criticism of the military’s preparedness and tactics swelled after the battles ended without a clear-cut Israeli victory.

Questions about the wisdom of 11th-hour battles and reports of food and water shortages fueled demands for inquiries into the war’s conduct and the resignation of Israel’s wartime leaders.

Halutz acknowledged the shortcomings, but had earlier resisted pressure to resign.

The military said yesterday that Halutz decided to step aside now that dozens of military inquiries into various aspects of the war had been concluded. “Now that this process has been completed, the chief of staff has asked to resign immediately,” the military said in a brief statement.

None of the inquiries concluded he should quit or be dismissed.

“For me, the word ‘responsibility’ is very significant,” Halutz wrote in his resignation letter. “My concept of responsibility is what led me to remain in my position until this point, and to place this letter on your desk today.” Both Olmert and Peretz accepted the chief of staff’s resignation, the military said. There was no immediate word on when the resignation would go into effect, but Halutz was expected to remain on the job until a replacement is named.

Three candidates dominating the succession speculation are deputy chief of staff Maj. Gen. Moshe Kaplinsky, who was dispatched to the Lebanon front to assume command during the war; Gabi Ashkenazi, a retired general and current director general of the Defense Ministry; and Maj. Gen. Benny Ganz, Israel’s top field officer. Olmert’s bureau said the prime minister initially asked Halutz to reconsider.

— With input from agencies